The substitution effect will always move in the same direction as the income effect.

Question

Quizplus · Accepted Answer

The substitution effect and the income effect can move in opposite directions. The substitution effect occurs when consumers switch from a more expensive good to a less expensive one as prices change, while the income effect describes how a change in purchasing power (due to a price change) affects consumption. For example, if the price of a good falls, the substitution effect leads to buying more of the cheaper good, but the income effect might lead to buying more of all goods, including the now cheaper one, depending on whether the good is normal or inferior.

The Substitution Effect Will Always Move in the Same Direction