Asked by Ashley Combs on Jul 24, 2024
Verified
The income effect of a decrease in the price of legal services,a normal good,is a(n) :
A) decrease in the demand for legal services.
B) decrease in the quantity demanded of legal services.
C) increase in the quantity supplied of lawyers.
D) increase in the quantity demanded of legal services.
E) increase in the supply of lawyers.
Income Effect
The variation in the income of a person or an economy and its impact on the demand for products or services.
Legal Services
Professional services provided by qualified lawyers or legal practitioners, including advice, representation, or the preparation of legal documents.
Normal Good
A good for which demand increases as the income of consumers increases, and decreases as the income falls.
- Acknowledge the differences between normal goods and inferior goods and grasp the effects of income adjustments on their demand.
Verified Answer
AK
Amisha KumarJul 28, 2024
Final Answer :
D
Explanation :
A decrease in the price of legal services will increase the purchasing power of consumers, leading to an increase in the quantity demanded of legal services. This is known as the income effect. The decrease in price may also lead to a substitution effect, where consumers switch from substitute goods (such as self-representation or alternative dispute resolution) to legal services, leading to a further increase in quantity demanded.
Learning Objectives
- Acknowledge the differences between normal goods and inferior goods and grasp the effects of income adjustments on their demand.