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  • Income vs Substitution Effects in Demand

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    Tabatha Duran
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    If the substitution effect is small, the income effect dominates and x and price y move in opposite directions. If the substitution effect is large, x and price y move in the same direction. This chapter discusses how the size of the substitution effect determines whether the income or substitution effect dominates when price changes cause the quantities of goods x and y to move in the same direction or opposite directions.

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    Chapter 6 Notes

    Original Title

    A6 - Chapter 6 Notes

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    If the substitution effect is small, the income effect dominates and x and price y move in opposite directions. If the substitution effect is large, x and price y move in the same direction. This chapter discusses how the size of the substitution effect determines whether the income or substitution effect dominates when price changes cause the quantities of goods x and y to move in the same direction or opposite directions.

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    © All Rights Reserved
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    3 views1 page

    Income vs Substitution Effects in Demand

    Uploaded by

    Tabatha Duran
    If the substitution effect is small, the income effect dominates and x and price y move in opposite directions. If the substitution effect is large, x and price y move in the same direction. This chapter discusses how the size of the substitution effect determines whether the income or substitution effect dominates when price changes cause the quantities of goods x and y to move in the same direction or opposite directions.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Chapter 6

     If there is a small substitution effect, the income effect dominates, and


    o x and price y move in opposite directions
     If there is a large substitution effect,
    o they move in the same direction

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