Please discuss income and substitution effect of a price increase in gasoline.© BrainMass Inc. brainmass.com June 4, 2020, 4:23 am ad1c9bdddf
According to the law of demand, when the price of a good changes (decrease), the amount of that good that a consumer is willing to buy, changes in the opposite direction. One reason is, when the price of a good rises, the money that a consumer has budgeted has a lower ...
This paper discusses the income and substitution effect of a price increase in gasoline. The substitution effect is the change in the consumption of a good that would result if the consumer remained on the same indifference curve after the price of that good changed. On the other hand, Income effect is a change in consumption of a good as a result of a change in purchasing power when there is a change in a good's price.