If the price of a normal good falls, 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

When the price of a normal good falls, the income effect causes households to feel wealthier, leading them to buy more of the good because they can afford more of it. The substitution effect causes households to buy more of the good as well, as it becomes relatively cheaper compared to other goods, making it a more attractive option.

If the Price of a Normal Good Falls, the Income