Difference between revisions of "Substitution effect"
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According to [[Principles of Economics by Timothy Taylor (3rd edition)]], | According to [[Principles of Economics by Timothy Taylor (3rd edition)]], | ||
:[[Substitution effect]]. When a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect. | :[[Substitution effect]]. When a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect. | ||
| + | According to [[Macroeconomics by Mankiw (7th edition)]], | ||
| + | :[[Substitution effect]]. The change in consumption of a good resulting from a movement along an indifference curve because of a change in the relative price. (Cf. income effect.) | ||
[[Category: Economics]][[Category: Articles]] | [[Category: Economics]][[Category: Articles]] | ||
Latest revision as of 19:31, 2 July 2020
Substitution effect is when a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect.
Definition
According to Principles of Economics by Timothy Taylor (3rd edition),
- Substitution effect. When a price changes, consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price; always happens simultaneously with an income effect.
According to Macroeconomics by Mankiw (7th edition),
- Substitution effect. The change in consumption of a good resulting from a movement along an indifference curve because of a change in the relative price. (Cf. income effect.)
