Business, 16.07.2019 21:00 xojade

If the price of lattes, a normal good you enjoy, falls both the income and substitution effects lead you to buy more lattes. the income and substitution effects offset each other but the price effect leads you to buy more lattes. the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased. the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased.

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