If a good is normal, then both the substitution effect and the income effect cause quantity demanded to change in the same direction.

Name: If a good is normal, then both the substitution effect and the income effect cause quantity demanded to change in the same direction.
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Question

Quizplus · Accepted Answer

For a normal good, both the substitution effect and the income effect lead to an increase in quantity demanded when the price decreases, as the good becomes relatively cheaper and the consumer's purchasing power increases.

If a Good Is Normal, Then Both the Substitution Effect