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 because the good becomes cheaper relative to other goods, so consumers buy more of it. The income effect occurs because the consumer effectively has more income (since they're spending less on the good), and for a normal good, this leads to an increase in quantity purchased as well.

When the Price of a Normal Good Falls, the Substitution