Author Question: When the price of a good falls, the income effect for a normal good implies that people buy A) ... (Read 106 times)

LaDunn · **on:** Jun 29, 2018

When the price of a good falls, the income effect for a normal good implies that people buy

A) less of that good because the relative price of the good has fallen.
B) more of that good because the relative price of the good has risen.
C) less of that good because they cannot afford to buy all the things they previously bought.
D) more of that good because they can afford to buy more of all the things they previously bought.

Question 2

When the price of an inferior 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