In indifference curve analysis, the combined income and substitution effects account for the entire change in the quantity demanded when the price of a good changes.

Question

Quizplus · Accepted Answer

The indifference curve analysis breaks down the effect of a price change into the income effect and the substitution effect, which together explain the total change in the quantity demanded of a good.

In Indifference Curve Analysis, the Combined Income and Substitution Effects