Let us consider two factors - change in price and change in real income.
Nominal income is 10,000.
"Real Income=\\frac{Nominal Income}{CPI}"
"CPI=\\frac{1600-700}{1600}=0.5625"
"RealIncome=\\frac{10,000}{0.5625}=17,777.77"
Substitution effect is the change in demand when the purchasing power remains constant, so suppose that real income hasn't changed.
"(20+\\frac{10,000}{8*1,600})-(20+\\frac{10,000}{8*900})=0.607"
Income effect is the change in demand due to the change of real income.
"(20+\\frac{10,000}{8*900})-(20+\\frac{17,777.77}{8*900})=1.08"
Overall effect is "0.607+1.08=1.687"
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