Final answer:
A decrease in purchasing power arises from a decrease in a consumer's income, an increase in the price of goods on both axes of a budget constraint, which can limit a consumer's ability to purchase the same quantity of goods as before.
Step-by-step explanation:
The question pertains to what factors will result in a decrease in a consumer’s purchasing power. Purchasing power refers to the amount of goods or services a person can buy with a unit of currency. Factors that can lead to a decrease in purchasing power include A) A decrease in a consumer’s income, B) An increase in the price of the good on the vertical axis, and C) An increase in the price of the good on the horizontal axis. When consumer income decreases, there is less money to spend on goods and services. Similarly, an increase in price means consumers must spend more to purchase the same quantity of goods, effectively reducing their purchasing power. This is compounded by the fact that a price hike in one good can affect the consumption of other goods due to budget constraints.
For instance, considering Sergei's consumer choice in Economics, if there is a price increase for baseball bats, Sergei's budget constraint for baseball bats and cameras would rotate inward from the vertical axis, limiting his ability to purchase baseball bats but not affecting his consumption of cameras directly. However, as he reallocates his budget to afford fewer baseball bats, he may also adjust his camera purchases. This example illustrates how price changes can influence the consumption choices and overall purchasing power of a consumer.