I’m working on a micro economics question and need an explanation to help me study.
Imagine that you have a choice between consuming good x or y, and that the price of x increases. Since good x is now more expensive, we know that your purchasing power will decrease. We also know that the substitution effect will see you shift consumption out of good x and into good y. Is it possible that the income effect has you consuming more of both good x and y as a result of this price change? Why or why not