Final answer:
A decrease in the price of good X or an increase in the price of good Y will lead to a decrease in the consumption of good X due to the income effect, assuming both goods are normal goods. This is because a price change in one good affects the overall purchasing power and consequently the consumption of both goods.
Step-by-step explanation:
According to the income effect, a decrease in the price of good X or an increase in the price of good Y will cause the consumer to buy less of good X if both goods are normal goods. The income effect reflects how consumption choices are adjusted due to changes in purchasing power. When the price of good X increases, the consumer's buying power is diminished, leading to a decrease in the consumption of good X. On the other hand, an increase in the price of good Y, while keeping the consumer's income constant, effectively reduces the consumer’s overall buying power as well. Therefore, despite the unchanged price of good X, the consumer feels poorer and, as a result, reduces their consumption of good X as well, since it is a normal good. The reduction in the quantity demanded of good X due to a decrease in real income or buying power is demonstrated by the movement from a higher to a lower indifference curve while holding relative prices constant.