Consider the Indifference Curve Map and Budget Constraint for Two

question 135

Multiple Choice

Consider the indifference curve map and budget constraint for two goods, X and Y. Suppose the good on the horizontal axis, X, is normal. When the price of X increases, the substitution effect

• A) and income effect both cause an increase in the consumption of X.
• B) causes a decrease in the consumption of X, and the income effect causes an increase in the consumption of
• C) causes an increase in the consumption of X, and the income effect causes a decrease in the consumption of
• D) and income effect both cause a decrease in the consumption of X.