Income Effect Vs Substitution Effect

The income effect and the substitution effect.

Income effect vs substitution effect. The income effect expresses the impact of increased purchasing power on consumption while the substitution effect describes how consumption is. Income effect is a result of the change in the real income due to the change in the price of a commodity as against substitution effect arises due to change in the consumption pattern of a substitute good resulting from a change in the relative prices of goods. Income effect and substitution effect are the components of price effect i e.