Substitution and Income Effect

Media Type: Office Hours Topic: Supply & Demand

In this video I discuss how price changes can create two effects. The first, substitution effect, occurs when a price change causes a consumer to switch products. The second, income effect, relates to how price changes alter the purchasing power of a fixed amount of income.

Your Thoughts
Was this helpful to you?
(18 votes)
Related Content

What People are saying...

Who's Dirk?
More on the man, himself. Meet Dirk
Econ Media Library
Check out multimedia tools, videos and more in our Media Library