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 occurs when a price drop makes a good more attractive relative to other goods, leading consumers to substitute towards it, increasing the quantity purchased. The income effect happens because the consumer effectively has more purchasing power when the price of a good falls, also leading to an increase in the quantity purchased if the good is normal.

When the Price of a Normal Good Falls, the Substitution