Temple University

Economics 201

Microeconomics and Behavior
Chapter 4

Effects of Changes in Prices
    The consumer's best choice, given prices and income
    The Price Consumption Curve: Choices holding other prices and nominal income constant
    The Individual's Demand Curve

Effects of Changes in Income
    The Income Consumption Curve
    The Engel Curve

Decomposition of consumer response to changes in prices
    Substitution Effect: Compensate for a price change so that utility remains unchanged - movement along an indifference curve
    The Income Effect: The shift between indifference curves after accounting for the substitution effect