Analyzing Consumer Response to a Price Change

The price of coffee falls, leading a consumer to increase their total monthly purchase of coffee by 10 cups. An analysis of this change reveals that the income effect accounts for an increase of 3 cups per month. Based on this information, what is the substitution effect?

The price of a particular brand of canned soup, which is a type of good that people buy more of when their real income falls, increases. A consumer observes that their total monthly consumption of this soup decreases by 5 cans. This total change is composed of two distinct parts: one change resulting from the consumer's reduced purchasing power, and another change resulting from the soup now being relatively more expensive than alternatives. If the change in consumption due to the consumer's reduced purchasing power is an increase of 2 cans per month, what is the change in consumption caused purely by the soup becoming relatively more expensive?

When the price of streaming movie rentals decreased, a consumer's monthly rentals increased by a total of 6 movies. An analysis determined that the increase in the consumer's real purchasing power accounted for an increase of 2 of these movies. The remaining increase, which is due to movies becoming cheaper relative to other entertainment options, is therefore ____ movies.

Disaggregating a Consumer's Response to a Price Change

Suppose the price of concert tickets increases. As a result, a consumer buys 8 fewer tickets per year in total. The decrease in the consumer's real purchasing power, considered on its own, accounts for a reduction of 3 tickets purchased. Based on this information, the statement 'The change in consumption due solely to tickets becoming more expensive relative to other goods is a decrease of 11 tickets' is true.

Analyzing Consumer Behavior in Response to a Soda Tax

For each scenario describing a consumer's response to a price change, calculate the change in consumption that is due only to the product becoming relatively more or less expensive, and match the scenario to its correct calculated value.

Evaluating a Policy's Effectiveness Using Consumer Theory

The price of instant noodles, a good whose consumption decreases as purchasing power rises, falls. A student observes that their total monthly consumption of instant noodles decreases by 5 packs. This change can be broken down into two components. The component resulting from instant noodles becoming cheaper relative to other foods causes a 7-pack increase in consumption. What is the component of the change in consumption that is attributable to the increase in the student's real purchasing power?