Chapter 19, Problem 11P

To determine

Concept Introduction:

Substitution effects: It states that the demand of a good increases if the price of a substitute good increases and vice versa. Take an example of tea and coffee, tea and coffee are substitute goods. Hence, if the price of tea increases, then the demand for coffee increases.

Income effects: It states that the demand for normal goods and the income are directly related which means that when income increases, then the demand for normal goods also increases and vice versa.