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.

A) more; more
B) more; less
C) less; more
D) less; less

Substitution Effect

The change in consumption that results from a change in the relative price of goods, leading consumers to substitute away from higher-priced goods.

Income Effect

The income effect describes the change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Normal Good

A type of good for which demand increases as the income of the consumer increases, holding all else constant.