Introduction to Income and Substitution Effects

Hi everyone in this video I’m going to give an introduction to understanding income and substitution effects.

What I’m doing what is called a Hicksian analysis of substitution effects (change relative prices, hold utility constant). In another video I will go through the alternative variation which is the Slutsky approach, and I’ll link to that below in the description when I’m done.

Chapters:
0:00 Introduction
0:34 Recap to Understand Diagrams
2:04 Shift of Budget Constraint due to change in Price
3:28 Income and Substitution Effects (Discussion)
5:48 Income and Substitution Effects (Showing on the Diagram)

Some videos on consumption choice that might help:

Intro to Budget Constraints:    • Introduction to Budget Constraints  
Intro to Indifference Curves:    • Introduction to Indifference Curves (...  

Keep safe and happy everyone!