The income effect works in the same direction as the substitution effect when a good is normal and works in the opposite direction when the good is inferior. A price increase causes demand to fall due to the substitution effect and, if the good is normal, demand also falls due to the income effect. If price decreases for a normal good, both effects cause consumption to increase.

   To the right we show the income effect alone. Had movies been an inferior good her consumption of movies would be less, not more on the higher budget constraint, MS would be to the left of MN.

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