When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes: Select one: a. the income effect. b. an inferior good. c. the rationing function of prices. d. the substitution effect.

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09-06-2022
Business

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When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes: Select one: a. the income effect. b. an inferior good. c. the rationing function of prices. d. the substitution effect.

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okpalawalter8 okpalawalter8 · Answer 1 · 2022-06-14T17:03:03+02:00

"When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product." This statement describes the rationing function of prices. Option C. This is further explained below.

What is the price?

Generally, price is simply defined as the set price you'll need to pay for a commodity.

In conclusion, When a product's price drops, buyers have more discretionary income and may afford to buy more of it. In this sense, prices serve as a rationing mechanism.