When the price of a normal good falls, the substitution effect ...

[wrbasek0]

When the price of a normal good falls, the substitution effect leads to ________ in the quantity purchased and the income effect leads to ________ in the quantity purchased.
 
  A) an increase; an increase
  B) an increase; a decrease
  C) a decrease; an increase
  D) a decrease; a decrease

Question 2

According to one study, the price elasticity of demand for cigarettes is 0.25. To decrease the consumption of cigarettes by 8 percent, a tax on cigarettes must raise the price of cigarettes by
 
  A) 32 percent.
  B) 25 percent.
  C) 2 percent.
  D) 3.1 percent.

[softEldritch]

Answer to Question 1

A

Answer to Question 2

A