Assume that the price of good $x$ increases. The substitution effect shows that the consumption of good $x$ falls, regardless of whether $x$ is a normal or inferior good.

Question

Quizplus · Accepted Answer

The substitution effect suggests that as the price of good x increases, consumers will substitute it for cheaper alternative goods. This leads to a decrease in the consumption of good x, regardless of whether it is a normal or inferior good. According to the substitution effect, as the price of good $x$ increases, consumers will tend to switch to substitute goods that are now relatively cheaper. This holds true for both normal and inferior goods, resulting in a decrease in the consumption of good $x$.

Assume That the Price of Good xxx Increases the Substitution Effect Shows That the Consumption of Good

Assume That the Price of Good $x$ Increases the Substitution Effect Shows That the Consumption of Good