Consider a consumer buying perfect complements. If there is a decrease in the price of good 1, the total change in consumption of good 1 is due toGroup of answer choicesthe pure substitution effectthe income effectthe pure substitution effect minus the income effectit depends on whether the good is inferior or normalnone of the above

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Solution 1

The total change in consumption of good

Solution 2

Solution 3

The total change in consumption of good 1 is due to the income effect.

Here's why:

Perfect complements are goods that are always consumed together in fixed proportions. For example, left and right shoes are perfect complements because you always need one of each.
If the price of good 1 decreases, the consumer effectively has more income to spend (because they can buy the same amount of good 1 for less money).
This increase in purchasing power (the income effect) allows the consumer to buy more of both goods, assuming they are normal goods.
The substitution effect, which is the change in consumption that results from a change in the relative prices of goods, doesn't apply in the case of perfect complements because the consumer always wants to consume the goods in the same ratio. So, a change in the price of one good doesn't make the other good relatively more or less attractive.
Therefore, the total change in consumption of good 1 due to a decrease in its price is due to the

This problem has been solved

Solution 4

The total change in consumption of good 1 is due to the income effect.

Here's why:

Perfect complements are goods that are always consumed together in fixed proportions. For example, left and right shoes are perfect complements because you always need one of each.
If the price of good 1 decreases, the consumer effectively has more income to spend (because they can buy the same amount of good 1 for less money).
This increase in purchasing power (the income effect) allows the consumer to buy more of both goods, assuming they are normal goods.
The substitution effect, which is the change in consumption that results from a change in the relative prices of goods, doesn't apply in the case of perfect complements because the consumer always wants to consume the goods in the same ratio. So, a change in the price of one good doesn't make the other good relatively more or less attractive.
Therefore, the total change in consumption of good 1 due to a decrease in its price is due to the income effect.

This problem has been solved

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