If a good is normal, then a decrease in price will cause a substitution effect that is
A) positive and an income effect that is positive.
B) positive and an income effect that is negative.
C) negative and an income effect that is positive.
D) negative and an income effect that is negative.

Question

Quizplus · Accepted Answer

For a normal good, a decrease in price leads to a positive substitution effect (consumers buy more of the cheaper good) and a positive income effect (consumers feel richer and buy more of the good).

If a Good Is Normal, Then a Decrease in Price