I think it is normal good and in normal good there is income as well as substitution effect and both are in same direction. Eg. Px=10 Px1=5 Py=20 Qx=100 I = 2000 Now , 20/10 = 2 But Px falls than Py price is more = 20/5=4 As customer now can purchase more of X it is substitution effect. Income effecRead more
I think it is normal good and in normal good there is income as well as substitution effect and both are in same direction.
Eg. Px=10 Px1=5
Py=20 Qx=100
I = 2000
Now ,
20/10 = 2
But Px falls than Py price is more = 20/5=4
As customer now can purchase more of X it is substitution effect.
Income effect also in same direction because real power of money increases.
Income Effect or Substitution Effect ?
I think it is normal good and in normal good there is income as well as substitution effect and both are in same direction. Eg. Px=10 Px1=5 Py=20 Qx=100 I = 2000 Now , 20/10 = 2 But Px falls than Py price is more = 20/5=4 As customer now can purchase more of X it is substitution effect. Income effecRead more
I think it is normal good and in normal good there is income as well as substitution effect and both are in same direction.
See lessEg. Px=10 Px1=5
Py=20 Qx=100
I = 2000
Now ,
20/10 = 2
But Px falls than Py price is more = 20/5=4
As customer now can purchase more of X it is substitution effect.
Income effect also in same direction because real power of money increases.