Suppose the price of the normal good X decreases. In this case, the substitution effect states that the consumer purchases _____ of good X, and the total effect is _____ in consumption of good X.

Question

Quizplus · Accepted Answer

The substitution effect implies that when the price of a good decreases, it becomes relatively cheaper compared to other goods, leading consumers to buy more of it. The total effect, which includes both the substitution and income effects, also results in an increase in consumption of the good, as the consumer's purchasing power increases with the price decrease.

Suppose the Price of the Normal Good X Decreases