Assume that the price of good $x$ increases. If x is a normal good, both the income and substitution effects lead to a fall in consumption of x.

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When the price of a normal good increases, the income effect leads to a decrease in purchasing power for the consumer, which may cause them to consume less of all goods, including good x. Additionally, the substitution effect may cause consumers to substitute towards cheaper alternatives to good x, causing a further decrease in consumption of x. Therefore, both effects lead to a fall in consumption of x. When the price of a normal good increases, its consumption decreases due to two effects: the substitution effect, where consumers switch to substitute goods that are relatively cheaper, and the income effect, where the increase in price reduces the purchasing power of the consumer's income, leading to a decrease in the quantity demanded of the good. Therefore, both effects lead to a fall in consumption of x.

Assume That the Price of Good xxx Increases If X Is a Normal Good, Both the Income

Assume That the Price of Good $x$ Increases If X Is a Normal Good, Both the Income