Income and Substition Effects

Principles of Macroeconomics

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Income effect Substitution effect Original budget line Hypothetical budget line New budget line E 1 E’ E 2 Income and Substitution Effects: Px increases X Y
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Original budget line Hypothetical budget line New budget line Income and Substitution Effects: Px decreases
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Unformatted text preview: Income effect Substitution effect E 1 E E 2 X Y Original budget line Hypothetical budget line New budget line Income and Substitution Effects: Px decreases (Inferior Good) Income effect Substitution effect X Y E 1 E E 2...
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Income and Substition Effects - Income effect Substitution...

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