We know that consumption on the compensated budget lies to the left of A. Due to the substitution effect alone we know that quantity demanded will fall. Suppose our consumer would pick point C, purchasing VC videos on the compensated budget.

    When we remove the income effect the remaining substitution effect, VO - VC, indicates that quantity demanded fell due to a price increase. The pure substitution effect will always cause quantity demanded to fall when price rises, and quantity demanded to rise when price falls. In other words, the substitution effect is always inversely related to the price change.

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