Question

Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good.

Answer 1

Answer:

less, less

Explanation:

then the substitution effect results in the person buying less of the good and the income effect results in the person buying less of the good.

Due to price rise, consumer will shift to cheaper goods, therefore the rate at which people buying beer will decrease. The consumer's real purchasing power has  decreased and since beer is a normal good, the decrease in  purchasing power will lead to a decrease in the quantity of  beer demanded by the consumer