Answer to Question #53247 in Microeconomics for EMMA

Question

Assume that a college student purchases only Red Bull and Mars bars. If both Red Bull and Mars bars are normal goods, the income effect associated with a decrease in the price of a Mars will result in:A an increase in the consumption of Mars and a decrease in the consumption of Red Bull.
B an increase in the consumption of Mars and an increase in the consumption of Red Bull.
C a decrease in the consumption of Mars and a decrease in the consumption of Red Bull.
D a decrease in the consumption of Mars and an increase in the consumption of Red Bull.

Answer 1

If both Red Bull and Mars bars are normal goods, the income effect associated with a decrease in the price of a Mars will result in an increase in the consumption of Mars and a decrease in the consumption of Red Bull, because the demand for normal good increases, if the good is normal and its comparative value now is lower, then the the value of other one.
So, the right answer is:

A. an increase in the consumption of Mars and a decrease in the consumption of Red Bull.