3. Assume that Coldplay CD's are a normal good for you, and that you regularly purchase these CD's. Following is a decrease in the price of Coldplay CD's.
a) You will consume fewer CD's because there is no income effect. b) You will consume more CD's because both the income effect always outweighs the substitution effect for normal goods.
c) You will consume more CD's because both the income and substitution effect dictate that you do so.
d) Your consumption of CD's will not change because the substitution effect and income effect will offset each other.
e) You can't be sure whether you will increase or decrease consumption of CD's without knowing the relative sizes of the income effect and substitution effect.