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 (as it effectively reduces purchasing power), and for a price decrease, it is positive (as it effectively increases purchasing power).

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