Answer to Question #166493 in Macroeconomics for Peter

Question

Using cardinalists approach of consumer behavior distinguish between income and and substitution effect of a price rise for a normal good?

Answer 1

The income effect checks on the cause of higher buying costs and consumption, while the substitution effect looks at how consumption is affected by changing available money and costs.

Consumer cost and using of normal goods rises with an increase in buying power, which is different with inferior goods.