The direction of the substitution effect is not influenced by whether the good is normal or inferior.

Name: The direction of the substitution effect is not influenced by whether the good is normal or inferior.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The substitution effect, which describes how consumers reallocate their consumption towards cheaper alternatives when the price of a good changes, is purely based on relative prices and does not depend on the income effect or whether the good is normal or inferior.

The Direction of the Substitution Effect Is Not Influenced by Whether