If the price of a normal good rises, the income effect will result in households buying ________ of the good and the substitution effect will result in households buying ________ of the good.
A) more; more
B) more; less
C) less; more
D) less; less

Question

Quizplus · Accepted Answer

The income effect means that when the price of a good rises, consumers feel poorer and thus buy less of the good. The substitution effect means that when the price of a good rises, consumers will substitute away from it towards cheaper alternatives, also buying less of the good.

If the Price of a Normal Good Rises, the Income