When the price of an inferior good falls, the substitution effect leads to in the quantity purchased and the income effect leads to in the quantity purchased.

Question

Quizplus · Accepted Answer

The substitution effect causes consumers to buy more of the good as it becomes cheaper relative to other goods. However, for an inferior good, the income effect leads to a decrease in quantity purchased because as consumers feel effectively richer, they tend to buy less of the inferior good and more of other goods.

When the Price of an Inferior Good Falls, the Substitution