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1.3 A price change is known to cause both income and substitution effect Suppose you are given
equation PXX+PyY=1. If we assume that good X is a normal good and its price decreases while
good Y and I remains constant. Carefully choose a diagram and explain the income and
substitution

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1.3 A price change is known to cause both income and substitution e.pdf

  • 1. 1.3 A price change is known to cause both income and substitution effect Suppose you are given equation PXX+PyY=1. If we assume that good X is a normal good and its price decreases while good Y and I remains constant. Carefully choose a diagram and explain the income and substitution