Question

If the price of lattes, a normal good you enjoy, falls both the income and substitution effects lead you to buy more lattes. the income and substitution effects offset each other but the price effect leads you to buy more lattes. the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased. the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased.

Answer 1

If the price of lattes, a normal good you enjoy, falls "both the income and substitution effects lead you to buy more lattes. "


The income effect expresses the effect of expanded acquiring power on utilization, while the substitution impact depicts how utilization is affected by changing relative wage and costs. Distinctive products and ventures encounter these progressions in various ways.