Bakersfield College

ECONOMICS 2004-06: SECTION 2: MICROECONOMICS HIGHER. 2.1 Markets. 2.2.3 Income Elasticity of Demand . Income and Substitution Effects . When the price of a good falls there are two effects: Substitution effect: people buy more because it is relatively cheaper. Income effect: real income rises because of the lower price of the good: Normal goods: the consumer buys … ................
................