A consumer spends one percent of his income on orange juice. An
increase in the price of orange juice will reduce the quantity
of orange juice demanded as he
1. moves upward to the left along his demand curve,
which shifts to the left on account of the income effect.
2. moves up and to the left along his demand
curve substituting other beverages for orange juice.
3. moves upward to the left along his demand
curve, which is steeper on account of the income effect.
4. moves down to the left along his demand
curve, taking into account both income and substitution effects.
Choose the option that yields the correct answer.