What is meant by price effect? Give two examples to illustrate this?
Price effect represents the impact that an alteration in value has on consumers’ demand for a service or good in the market. It may also refer to the influence that some event has on a commodity’s price. An example of such an effect can be illustrated with consideration of two goods, including tea as well as coffee. As the price of tea rises, the demand for tea falls while the demand for coffee rises. Similarly, another example of this effect is the one exerted by fuel on demand for automobiles. Hereby, as the price of fuel rises, the demand for automobiles falls.
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