Answer to Question #294085 in Microeconomics for GAURAV

Question

Price effect is a summation of income effect and substitution effect. explain digramatically in case of

a) fall in price of good Y

b) Rise in price of good x

draw demand curve as well

Answer 1

a) fall in price of good Y- The quantity demanded rises because the prices have fallen.

b) Rise in price of good x- The quantity demanded fall because or the more prices, people will trend to buy less.