Multiple Choice
If the price of lattes, a normal good that you enjoy, falls,
A) the income and substitution effects offset each other, but the price effect leads you to buy more lattes.
B) both the income and substitution effects lead you to buy more lattes.
C) the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased.
D) the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased.
Correct Answer:
Verified
Correct Answer:
Verified
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