Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of Ramen noodles, by itself, will result in
A)a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
B)a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
C)an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
D)an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.

Question

Quizplus · Accepted Answer

The substitution effect of a price decrease in Ramen noodles will lead to an increase in their consumption as they become relatively cheaper compared to textbooks.

Assume That a College Student Purchases Only Ramen Noodles and Textbooks