When the price of a normal 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 relatively cheaper compared to other goods. The income effect also leads to an increase in quantity purchased because the consumer feels effectively richer, as they can buy more with the same amount of money.

When the Price of a Normal Good Falls, the Substitution