Because movies are a normal good (for this consumer) the income and substitution effects work together, that is both lead to reduced consumption due to an increase in price. As we will see, for inferior goods these effects work in opposite directions.
- MO - MN is the total change in consumption due to the price change.
- MO - MS is the change in consumption due to the substitution effect
- MS - MN is the change in consumption due to the income effect.
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