Answer to Question #267696 in Microeconomics for Shiji

Question #267696

Discuss the income and substitution effect of a price change in case of a normal good?

1
Expert's answer
2021-11-19T11:09:05-0500

The income impact is significant for everyday items. As an outcome, when the rate of a common commodity lowers, resulting in a gain in buying ability, the earning impact and the substituting impact will both operate to raise the proportion required of the item whose cost has decreased.


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