Income Substitution Effect Learning Management 收益与替代效应学习管理.pptVIP

Goods market Introductory Economics Lecture 3 Summing UP Factor market LAW OF DEMAND Price effect = ? 6.6 kg of wheat OR ? 20 kg of rice Price effect = Income effect + Substitution effect Normal goods : I.E is negative, S.E is negative. Hence P.E is also negative. Inferior goods : If I.E is sufficiently positive, it can overturn the negative S.E to give a positive P.E. In this case increase in Price will also increase the Quantity Demanded (Giffen Goods). Graphical illustration Factors causing shift in demand curve in PQ space Income Tastes Price of Complimentary Goods