Dave Consumes Two Normal Goods, X and Y, and Is

question 505

Multiple Choice

Dave consumes two normal goods, X and Y, and is currently at an optimum. If the price of good X falls, we can predict with certainty that

• A)Dave will consume more of both goods because his real income has risen.
• B)the substitution effect will be positive for good X and negative for good Y.
• C)Dave may consume more or less of good X, but he will consume less of good Y.
• D)the substitution effect will offset the income effect for good X.