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| Topic: |
Business
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| Number of pages / Number of words: |
3 / 830 |
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However there are certain demand curves that do just the opposite and slope in the other direction, which will be explained later.
For a normal good the substitution and income effects both go in the same directions. A rise in the price reduces in the quantity demanded because the price has risen. For a inferior good, the substitution effect and income effect go in opposite directions...
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For a inferior good, the substitution effect and income effect go in opposite directions. Although, the substitution effect is stronger than the income effect because with a inferior good, when the price rises it leads to a fall in demand. When a good changes in price, the quantity demanded will be changed by the sum of the substitution effect and the income effect...
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