Chapter 10, Problem 10P

To determine

To describe:

The substitution and income effect on these following situations

Concept Introduction:

Substitution effect: This is an economic theory in which when the price rises or income of the people falls people will substitute the dearer goods with less expensive alternative goods.

Income effect: This is described as the change in the quantity of goods and services due to a change in the income of the people.

Giffen good: This is a type of good in which the individuals consume more of the good when the price increases

Normal good: This is a type of good in which people buy more of them when the income increases and buy less of them when income decreases.