Hicksian and Slutsky: Price effect = Substitution effect+ Income effect

This lecture will help you to understand the concept of Price effect in case of consumer behaviour.Basically, It generates from the point when, other things are constant, the price of the consumer changes ( in our case decrease) then the demand for the quantity of that commodity also changes. That is called Price effect. but this price effect is nothing but the composition of Income effect and Substitution effect.
As far as the magnitude of substitubility and the core concept of variation of nominal income is concerned;there are ,atleast, two important but different concepts.
The first one is Hicksian concept which states that decrease should be equal to bring consumer to initial SATISFACTION POINT.
Where as, according to Slutsky approach, reduction in nominal income must be equal to bring consumer to the initial equilibrium point.

Income effect:

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[minalchopra]

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