Question
c) The consumption of a good, the price of which increases, can increase only if the income effect goes in the opposite direction to the
c) The consumption of a good, the price of which increases, can increase only if the income effect goes in the opposite direction to the substitution effect.
The answer to this question is true, but I don't understand how the income effect goes in the opposite direction? Moreover, the explanation below says the income effect is negative. However, I thought the income effect should be positive so that it can be opposite direction to the substation effect. Can someone please clarify it? Thanks
EXPLANATION: The substitution effect is negative, so the only way for consumption to increase is if the income effect is also negative.
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