hlo guys gud night sd..
. here is the question .what is negative income effect and substitution effect?
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helo ji.......
negative income effect -: at first u need to know income effect. income effect refers to change in quantity demanded of commodity when real income of the consumer changes owing to change in own price of the commodity.
in case of normal goods : the income effect will be positive coz income increases quantity demanded also increase. the slope will be positive in case of normal goods.
Now u can come to ur main points negative income effect : giffen or inferior types of goods whose income effect is negative means higher the income lower the demand. the slope will be negative.
Substitution effect : it refers to Change in quantity demanded of commodity -x when relative price of the commodity Px/Py changes owing to change in price of x
hope this help ^.^
negative income effect -: at first u need to know income effect. income effect refers to change in quantity demanded of commodity when real income of the consumer changes owing to change in own price of the commodity.
in case of normal goods : the income effect will be positive coz income increases quantity demanded also increase. the slope will be positive in case of normal goods.
Now u can come to ur main points negative income effect : giffen or inferior types of goods whose income effect is negative means higher the income lower the demand. the slope will be negative.
Substitution effect : it refers to Change in quantity demanded of commodity -x when relative price of the commodity Px/Py changes owing to change in price of x
hope this help ^.^
rohitroy6158pd7fu2:
what is giffen goods
giffen goods is a types of inferior goods or cheap goods where higher the income lower the demand or lower the price lower the demand. for ex... we use dalda ghee in place of deshi ghee, all low quality of products known as giffen goods
in case of giffen goods the law of demand are not applicable
or we can say exception of law of demand
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