The substitution effect is a change in consumption patterns due to changes in the relative prices of goods and services. Consumers replace more expensive products with cheaper ones. So, if the price of a product rises, consumers switch and increase
Price Effect
Income Effect: Meaning, Implications
The income effect measures the impact of changes in purchasing power on demand. It can be positive or negative.We measure the purchasing power of consumers from real income, namely nominal income, after adjusting for the price of the goods. It is