If the price of a good changes so that the income effect and the substitution effect reinforce one another,this means the good is:
A)inferior.
B)always on the budget line.
C)normal.
D)not likely to be bought.

Question

Quizplus · Accepted Answer

If the income effect and substitution effect reinforce one another, it means that as the price of the good increases, the quantity demanded of that good decreases. However, the decrease in quantity demanded has more to do with the fact that the good is relatively more expensive compared to other goods in the market, rather than any decrease in real income. This is indicative of a normal good. Hence, the correct answer is option C.

If the Price of a Good Changes So That the Income