Question

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

Answer 1

Answer:

The income effect

Explanation:

The income effect refers to an increase in the purchasing power of customers simply because the products or services that they want to buy are cheaper. Since the price of the products or services decreases, the customers are able to purchase a higher quantity of them.