Asked by
Garrett Hamrick
on Nov 04, 2024
Verified
For normal goods, the income and substitution effects help explain the downward slope of the demand curve.
Income Effects
The shift in income for either an individual or an economy, and its subsequent effect on the amount of a good or service desired.
Substitution Effects
The change in consumption patterns due to a change in relative prices, leading consumers to substitute one good for another.
Normal Goods
Goods for which demand increases when consumer income increases and vice versa.
- Fathom the role of income and substitution effects in interpreting the dynamics of consumer behavior in relation to price modifications for normal and inferior goods.
Verified Answer
MD
Learning Objectives
- Fathom the role of income and substitution effects in interpreting the dynamics of consumer behavior in relation to price modifications for normal and inferior goods.