princ-ch21-tation.pptVIP

In Active Learning 2, students determined that an increase in the price of a good pivots the budget constraint inward. Here, the price of a good is falling, so the budget line pivots outward. * On the previous slide, the fall in the price of fish caused a net decrease in Hurley’s demand for mangos: the substitution effect is greater than the income effect, as depicted on the following slide. However, it could have gone the other way: if the income effect were greater than the substitution effect, then Hurley’s demand for mangos would have risen. This diagram decomposes the movement fr