When the price of a good decreases, how do the income effect and the substitution effect change the quantity demanded of the good?
A)Both the income effect and the substitution effect increase the quantity demanded.
B)The income effect increases the quantity consumed, but the substitution effect may increase or decrease the quantity demanded.
C)The substitution effect increases the quantity demanded, but the income effect may increase or decrease the quantity demanded.
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答案 C
The substitution effect is a shift in consumption toward a larger quantity of a good that decreases in price. A decrease in the price of a good also has an income effect because the old bundle costs less. The income effect may result in consumption of a larger or smaller quantity of the good that has decreased in price, depending on whether it is a normal good or an inferior good.
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