Question

If the price of a good changes so that the income effect and the substitution effect reinforce one another, this means the good is:

		inferior.
		normal.
		always on the budget line.
		not likely to be bought.

Answer 1

Answer

Option 2

Normal good

The normal good substitution and income effects are in reinforcing each other as the change in price means if the price increases the substitution effect which to other good consumption and income effect switch to less consumption and vice verse.