| 单词 | income effect |
| 释义 | income effect The part of the response in the demand for a good to a change in its price which is due to the rise in the real income of consumers resulting from a price decrease. This effect is normally positive, except for inferior goods, for which the income effect is negative. The horizontal axis shows quantity of good X; the vertical axis shows quantity of all other goods at constant relative prices, measured by Y. ABC is the old budget line, at original prices. B is the old equilibrium, where the consumer reached indifference curve i0. ADE is the new budget line, after the price of X is reduced. D is the new equilibrium, where the consumer reaches indifference curve in. The shift from B to D can be decomposed in two alternative ways. 1) Point F on in shows the equilibrium with the old prices but the new welfare level; the slope of in at F is equal to the slope of ABC. The shift from B to F is the income effect, as real income rises while relative prices are unchanged; the shift from F to D is the substitution effect, as relative prices change holding real income constant. 2) Alternatively, point G represents the situation with the old welfare level but the new relative prices; the slope of i0 at G is equal to the slope of ADE. The shift from B to G is the substitution effect, as relative prices change holding real income constant; the shift from G to D is the income effect, as real income rises holding relative prices constant. For very small changes, BF and GD are equal and parallel, as are BG and FD. For discrete changes in price these equalities are only approximate. |
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