PERILAKU RUMAH

TANGGA DAN PILIHAN

KONSUMEN
Income and Substitution Effects

Price changes affect households in two

ways:

• The income effect:

Consumption changes
because purchasing power
changes.
• The substitution effect:
Consumption changes
because opportunity costs
change.
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 Income and Substitution Effects
of a Price Change (for normal goods)

Income effect: Substitution effect:

• When the price of a product • When the price of a product falls,

that product becomes more
falls, a consumer has more attractive relative to potential
purchasing power with the substitutes.
same amount of income.
• When the price of a product rises,
• When the price of a product that product becomes less attractive
rises, a consumer has less relative to potential substitutes.

purchasing power with the

same amount of income.

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 Income and Substitution Effects
of a Price Change (for normal goods)

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