Assume Gloria is initially in equilibrium and that X and Y are normal goods for her. Then the price of X falls. For Gloria to move to a new equilibrium point her consumption of
A) X must remain constant, but her consumption of Y must decrease.
B) X must decrease.
C) X must increase.
D) both X and Y must decrease.

Question

Quizplus · Accepted Answer

When the price of a normal good (X) falls, the consumer (Gloria) will typically buy more of that good because it has become relatively cheaper compared to other goods, leading to an increase in the consumption of X. This is due to the income and substitution effects working in the same direction for a normal good.

Assume Gloria Is Initially in Equilibrium and That X and Y