Question

When a price changes, it will always trigger both the substitution effect and the real-income effect.

true/false

Answer 1

True.

Step-by-step explanation:

The income effect states that when the price of a good decreases, it is as if the buyer of the good's income went up. The substitution effect states that when the price of a good decreases, consumers will substitute away from goods that are relatively more expensive to the cheaper good.