If a good is normal,then the income effect is _____ for a price increase and _____ for a price decrease.
A) positive; negative
B) positive; positive
C) negative; negative
D) negative; positive

Question

Quizplus · Accepted Answer

For a normal good, when income increases, demand increases, and when income decreases, demand decreases. Therefore, for a price increase, the income effect is negative (because it's as if the consumer's income has decreased), and for a price decrease, the income effect is positive (as if the consumer's income has increased).

If a Good Is Normal,then the Income Effect Is _____