Answer to Question #85117 in Microeconomics for Ayanda Lubisi

Question #85117
Assume that beer is a normal good. If the price of beer rises, then the substitution effect
results in the person buying … of the good, and the income effect results in the person
buying … of the good.

1. more, more
2. more, less
3. less, more
4. less, less
1
Expert's answer
2019-02-21T14:35:07-0500

Answer: 4.

Substitution effect tells us to consume less of what has become relatively more expensive (beer).

Income effect— push us toward even less beer consumption.



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