substitution effect

问题如下：

When decrease in the price of a normal good X,

选项：

A.

substitution effect is positive, and the income effect is positive as well.

B.

substitution effect is positive, but the income effect is negative

C.

substitution effect is negative, but the income effect is positive

解释：

A is correct.

When decrease in the price of a normal good X, we will buy more X because it is relatively cheaper than its substitutes. In terms of income effect, the total consumption level goes up, so we can buy more X. Therefore substitution and income effects are both positive.

考点：收入效应与替代效应

解析：对于正常品而言，收入效应和替代效应都是正的，这也意味着商品价格的下降，收入效应和替代效应会同时引起商品需求量的上升。