Does the substitution effect cause her to buy more or less

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Q. Suppose that macroeconomic forecasters predict that the economy will be expanding in the near future. How might managers use this information

Q. Michelle spends all her money on food and clothing. When the price of clothing decreases, she buys more clothing.

a. Does the substitution effect cause her to buy more or less clothing? Explain (if the direction of the effect is ambiguous, say so)

b. Does the income effect cause her to buy more or less clothing? Explain (if the direction of the effect is ambiguous, say so)

Reference no: EM1364425

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