Question

explain income effect and substitution effect briefly.

Answer 1

hi.........................

The income effect expresses the impact of increased purchasing power on consumption, while the substitution effect describes how consumption is impacted by changing relative income and prices. ... Some products, called inferior goods, generally decrease in consumption whenever incomes increase.

Answer 2

The substitution effect is the change in consumption patterns due to a change in the relative prices of goods this can occur from income increases price changes or even currency fluctuations.