Housing is a normal good that tends to take up a substantial share of a consumer's spending.An increase in the price of housing will result in:
A) both the income and substitution effects to decrease the quantity demanded of housing.
B) both the income and substitution effects to increase the quantity demanded of housing.
C) the income effect to increase the quantity demanded of housing and the substitution effect to decrease the quantity demanded of housing.
D) the income effect to decrease the quantity demanded of housing and the substitution effect to increase the quantity demanded of housing.

Question

Quizplus · Accepted Answer

An increase in the price of housing will lead to both the income effect and substitution effect decreasing the quantity demanded, as housing is a normal good and consumers will feel poorer and seek cheaper alternatives.

Housing Is a Normal Good That Tends to Take Up