The document is an economics presentation about price effect. It defines price effect as the change in demand in response to a change in price of a commodity, with other factors held constant. Price effect is the sum of the substitution effect and income effect. The substitution effect occurs when consumers substitute cheaper goods for more expensive goods to maximize satisfaction at a fixed income level. The income effect depends on whether a good is normal, inferior, or a Giffen good, and how changes in real income from price changes affect demand for that good.

1. ECONOMICS PRESENTATIONTOPIC- PRICE EFFECTPRESENTED BY:PRAVEEN KUMARROLL-882041BBALLB(3RD SEM)

2. PRICE EFFECT It is the change in demand, in response to a change in price of a commodity, other things remaining constant.Other Things: Income of the consumer, Tastes and Preference of the consumer, Price of other goods. All these are treated to be constant.

3. Proportionate change in Quantity demanded of x Proportionate change in Price of x Price Effect =

4. It is said that Price Effect is the summation of two effects :Substitution Effect.

5. Income Effect.PRICE EFFECT = INCOME EFFECT + SUBSTITUTION EFFECT

6. TO DISCUSS THE COMPONENTS Every price change therefore can be decomposed into Income Effect and Substitution Effect.SUBSTITUTION EFFECT : In this effect the consumer is forced to chose a product that is less expensive for maximizing his satisfaction as the nominal income of the consumer is fixed.

7. INCOME EFFECTThe Income effect can be discussed for two types of commodities:NORMAL GOODS : If there is a price fall real income increases due to which demand increases and vice versa.