Indifference Curves - Income and Substitution Effects for Inferior Goods

​In this revision video we look at the income and substitution effects for an inferior good.

​When the price falls, the substitution effect is NEVER perverse, it will always cause more to be demanded. But in the case of an inferior product, the income effect works in the opposite direction to the substitution effect.
Only if the substitution effect outweighs the income effect will demand expand when the price falls.

[adityamisra]

Although this is for A levels this has helped me for my degree

[coolnotcold.]

This is so helpful!! Thank you so much!!

[Zeshanwaleed]

I have one question you have make the graph for price decrease but in the case of price increase than would we make that graph other than budget line moves to left?

[omarmuneer]

In this example, does this make Nuts a normal good (as we buy more nuts due to the income effect) or can we not tell from this graph?

[francescomondini]

how do inferior goods react when their price increases?

[rainavinayak]

Hello! Will the concept and the diagram apply to giffen goods as well or do giffen goods have a different diagram?