aoa, sir this first assignement

1. Mansoor Rabbani ,R#81
Assignment: substitutioneffect
If price effectandincome effectbothcombinesitbecomessubstitutioneffect.
Increase in price of B
If A and B are two products,the price of B increasesthen whathappenswe have shownindiagram
In diagramit hasshown that initiallyconsumerspurchasesmore productsof Bbut whenprice of B
increases,comsumerpurchaseslessquantityof Bandbudjetline shiftsinwardandbecomesmore
steaperthaninitial budjetline.
Decrease in price of at x-axis

2. In diagramit isshownthat decrease inprice of sodaconsumerpurchasesmore quantityof sodaand
budjetline shiftsoutward,itbecomesmore flaterhttp://uplothaninitial,now consumercanpurchase
more quantityof soda.
Increase in income
In diagraminitialyincomeof consumerissame,butwhenincome of consumerincreasesnow he isable
to purchase more quantityof productx-axisandproductat y-axis,sohisbudjetline shiftsoutwardfrom
bothsidesat x-axisandat y-axis