Ch 7 - Screencast 7.4 - Price changes: Income and substitution effects for normal goods

Описание к видео Ch 7 - Screencast 7.4 - Price changes: Income and substitution effects for normal goods

Based on Chapter 7 of Bowles and Halliday (2022), we explore how to find income and substitution effects with a Cobb-Douglas utility function for coffee and data (two normal goods). We show how to use a compensated budget constraint that allows us to decompose the total effect into the income effect (the change in consumption as a consequence of a change in real income) and the substitution effect (the change in consumption because of the change in the opportunity costs of consumption) respectively.

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