Practice: Substitution and Income Effect with Indifference Curves If the price …

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Wize University Microeconomics Textbook > Theory of Consumer Choice

Substitution and Income Effect

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Practice: Substitution and Income Effect with Indifference Curves
If the price of a product increases and the income effect outweighs the substitution effect:

More Substitution and Income Effect Questions:

Adam buys 4 games a month for his PlayStation game console and 25 packs of kraft dinner a month. The prices of both goods drop by 40%. Assume that kraft dinner is an inferior good and play station games are ordinary goods. Show the income and substitution effects for both goods on a graph.
KD decreases
 
VG increases
 