Answer to Question #85117 in Microeconomics for Ayanda Lubisi

Question

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

Answer 1

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.