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  • ICAR and TNAU E-Course Summarized

    Summarized Notes
  • Quantity purchased will vary inversely with price when income effect is …………….. for normal goods

    Question: Quantity purchased will vary inversely with price when income effect is …………….. for normal goods

    Options:

    Zero
    Positive
    Negative
    None

    ✅ Explanation: For normal goods, both the income and substitution effects work in the same direction. When the price decreases, the quantity demanded increases due to both effects. To have the quantity purchased vary inversely with price (i.e., as price increases, quantity demanded decreases), the income effect needs to be negative and strong enough to offset the positive substitution effect.
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