A.9 Income and substitution effects | Consumption - Microeconomics

Learn more: www.policonomics.com/slutskys-...
Versión en español: • A.9 Efectos de renta y...
This video explains what the income and substitution effects are, and how to analyse them in order to understand why we buy more goods when their price goes down.
Related videos:
-Marshallian and Hicksian demand curves: • A.10 Marshallian and H...
-Indifference curves: • A.2 Indifference curve...
Related articles:
-Marshallian and Hicksian demand curves: www.policonomics.com/marshalli...
-Marginal rate of transformation: www.policonomics.com/marginal-...
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Learn, and enjoy!

[@Joy-nz9qv]

i could not understand what my professor was getting at with these diagrams but you explained it so well!!! thank you!!!!

[@headrushbeats187]

I'm sorry for being immature, but Slutsky is hilarious.

[@Policonomics]

multiLOLable Indeed!

[@Kons213]

There's a Russian football coach with the same last name, Leonid Slutsky, who used to coach team Russia in football. Later moved to the UK to work there, British football fans had a field day with his last name... xd Motto was "In Sluts We Trust"... lol

[@femiairboy94]

I have a candidacy exam in three weeks, you just saved me about three hours worth of review. God bless.

[@dennisajala7544]

A very impressive performance you have here. Thanks for these simplifications. However, I could not comprehend what you expressed when you talked about substitution effect at the beginning of the video. Please I would need it in writing. Thanks.

[@shwetaram4702]

In which direction will the substitution effect change the firm’s employment and capital stock if the price of capital increases?

[@giftyboakye-boateng2323]

Can the Hicksian substitute effect be used to discribe a perfect complement preference?

[@ahmedalam5048]

most concise VDO on the topic .....ever !!!! bestttt :D

[@ashishdhungana633]

how to draw a graph by ourselves in word or PowerPoint? is there any application to draw a graph like you did?

[@navinarajan1353]

Shouldn't the income effect be the derivative of the marsh demand multiplied by the Hicksian demand function not marsh (as derivative of the expenditure function wrt to prices is the hicksian demand)?

[@fillermusic8760]

How would the table look like for a decrease in price of the good?

[@sheema107]

grt job.really u made economics simple thumbs up!

[@youarif11]

what will happen for non-market environmental goods???

[@palesamofokeng6984]

so when the indefference curve shifts upwards the equilibrium also changes?

[@Economaa]

Minute 4:56 are you sure that there will be no effect on consumer welfare in this case? After all, there still is a price increase. I think you mean there is no effect on quantity of x consumed, however, the effect on consumer welfare is negative.

[@Prolui]

This was pretty helpful, thanks.

[@Policonomics]

Dear +Prolui ,
We just uploaded our fourth video to our series on Game Theory. It's about the Battle of the Bismarck Sea, we hope you find it interesting!
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If you like it, spread the word!
Thanks for watching,
The Policonomics Team

[@hassankourani4155]

@@Policonomics am””

[@user-md4tw8sp1c]

Great， loving you.

[@wisdomsimeon431]

Great video, thank you!

[@Policonomics]

Thank you for watching! 😀🅿

[@PhilipDK5800]

I don't understand the red line parallel to the new budget line?

[@IsisMarquesDesign]

Yes, so you can compare how much you actually can consume of x,y with your new bugdet and the amount of x,y you'd have consumed with your old budget.
It is as if you had fixed the utility curve and changed the price ratios.

[@lourensstrydom1502]

I would like to see you listening to yourself once upon a time when you also did this for the fist time

[@heyptech1726]

amazing thank you

[@NamalIndrajith-MCP]

Superb...

[@Victual88]

Thank you very much

[@mohammadfarhan7349]

what happen in giffen good case when price of x increases

[@irGuilty]

the demand would increase for the giffen good as well

[@mohammadfarhan7349]

irGuilty thanks

[@rossanabarazorda5733]

gracias,muy bien explicado :)

[@Policonomics]

Gracias a ti ❤ Acabamos de abrir nuestro canal en español! 🅿ua-cam.com/channels/khb76DGIpws2gZGC9UeyHw.html

[@gouriramkumar8430]

Shouldn't the red parallel restriction line pass through the initial equilibrium?

[@ruthn3293]

No

[@gabordanos7469]

veery nice

[@tahmidishraque6459]

Why SE is negative for normal goods? I can't understand :(

[@irentagreneity212]

Exactly,bt it's negative.. little difficult to understand.
*_*

[@user-md4tw8sp1c]

the substitution effect

[@andrei-teodorene9729]

Let's say you have pizza and burgers. A pizza is 3€ and a burger is also 3€. You don't really care about which one you buy, because both are the same price and same tasty. Suddenly, all the restaurant owners say that a pizza is 100€, you simply can't buy a pizza for less then 100€. What are you going to do? Spend 100€ for a damn pizza or just buy burgers for 3€???? I would buy burgers, everybody would do the same, I am not going to buy pizza, so, the demand for pizza is going to decrease, that's why the SE is negative, because you don't want pizza anymore, as it's too expensive, you want cheap and tasty burgers!

[@Zen-ds4od]

For price increase, the SE is negative. Because increase in price will make you want to consume less of it and more of the other good instead. For price decrease it is positive.

[@raaifriz3333]

Why do we even talk about the income effect? There is no change in Income right? Could someone please explain

[@Zen-ds4od]

increase in purchasing power, same as income increase

[@mdfahim8792]

Sister its not math its eco

[@nickspencer5234]

stupidly overcomplicated

[@10pmmemes88]

How much did you pay for a corpse to narrate the video?