Gilberto has a so-called fruit budget, which he uses to buy only apricots and nectarines. Assume the
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Question:
Gilberto has a so-called fruit budget, which he uses to buy only apricots and nectarines. Assume the price of apricots increases. Which of the following is an example of the income effect?
A.The increase in the price of apricots makes apricots relatively more expensive than nectarines, so Gilberto will buy fewer apricots and more nectarines. B. Because the price of apricots increases, Gilberto will choose to buy only nectarines and no apricots. C. The increase in the price of apricots decreases Gilberto's real income, which forces Gilberto to buy fewer fruits in general.
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