A consumer has made the best affordable choice of two normal goods. If the price of one good rises, which of the following statements about the consumer's choice is correct?

Question

Answer

The income effect increases the quantity and the substitution effect decreases the quantity the consumer buys.

Answer

The income effect decreases the quantity and the substitution effect increases the quantity the consumer buys.

Answer

The income effect is always larger than the substitution effect of the price rise.

Answer

The income effect and the substitution effect both increase the quantity the consumer buys.

Answer

The income effect and the substitution effect both decrease the quantity the consumer buys.

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A consumer has made the best affordable choice of two normal goods. If the price...

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