The correct answer is: B. Substitution effect plus income effect
The substitution effect is the change in the quantity demanded of a good that results from a change in its relative price, holding the consumer’s real income constant. The income effect is the change in the quantity demanded of a good that results from a change in the consumer’s real income, holding the good’s relative price constant.
When the price of a good decreases, the consumer’s real income increases, because they can now buy more goods with the same amount of money. This leads to an increase in the demand for all goods, including the good whose price has decreased. This is the income effect.
In addition, the decrease in the price of a good makes it relatively cheaper than other goods. This leads the consumer to substitute the good for other goods, which leads to an increase in the demand for the good. This is the substitution effect.
The total effect of a price change is the sum of the substitution effect and the income effect. The substitution effect is always negative, meaning that a decrease in price leads to an increase in demand. The income effect can be positive or negative, depending on the good. For normal goods, the income effect is positive, meaning that a decrease in price leads to an increase in demand. For inferior goods, the income effect is negative, meaning that a decrease in price leads to a decrease in demand.
The total effect of a price change can be either positive or negative, depending on the relative magnitudes of the substitution effect and the income effect. If the substitution effect is greater than the income effect, then the total effect will be positive. If the income effect is greater than the substitution effect, then the total effect will be negative.