When the price of a normal good decreases,
A)both the income and substitution effects encourage the consumer to purchase more of the good.
B)both the income and substitution effects encourage the consumer to purchase less of the good.
C)the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.
D)the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

Question

Quizplus · Accepted Answer

When the price of a normal good decreases, both the income effect (as the consumer's real income increases) and the substitution effect (as the good becomes relatively cheaper than other goods) encourage the consumer to purchase more of the good.

When the Price of a Normal Good Decreases