Question

As a group, U.S. consumers have no income response for their consumption of ice cream so that the income elasticity of demand for ice cream equals zero. Does this mean that the change in ice cream consumption that results from a price increase is entirely composed of the substitution effect? No, the income and substitution effects in this case move in opposite directions and completely offset one another, so it only appears that the income effect is zero No, any price change moves the point of consumption to a new indifference curve, so there must be a non-zero income effect We need more information about the goods to answer this question Yes, the income effect associated with a price change is zero

Answer 1

Yes, the income effect associated with a price change is zero

Step-by-step explanation:

From the question, we are informed that the U.S. consumers have no income response for their consumption of ice cream so that the income elasticity of demand for ice cream equals zero.

In this case the change in ice cream consumption that results from a price increase is entirely composed of the substitution effect, which is one effect of change in price as a result of consumer going for something cheaper than the first one.

It should be noted that the income effect associated with a price change is zero. Income Effect in microeconomics is when there is an alteration in the demand of a particular goods/service as a result of the change in Income.