How do substitution effects and income effects affect the demand curve?
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), the magnitude of the substitution effect depends on the availability of substitute goods. represented by an increase in utility, or movement to a higher indifference curve. A price decrease brings about an increase in real income; purchasing power. The income effect is the change in x* in going from C to B.
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the magnitude of the substitution effect depends on the availability of substitute goods. represented by an increase in utility, or movement to a higher indifference curve. A price decrease brings about an increase in real income; purchasing power. The income effect is the change in x* in going from C to B.
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