Economics : Micro 4
4th Edition
ISBN: 9781305436855
Author: MCEACHERN
Publisher: CENGAGE L
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Question
Chapter 12, Problem 1.2PA
To determine
Enlighten whether the effects are income or substitution when the cost of living increases and when there is a reduction in the
Concept Introduction:
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.
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.
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