In the two goods - two prices analysis, the effect of a change in the price of one of the goods is generally decomposed into the substitution effect and the income effect. The substitution effect is the change in the quantity of that good consumed when the budget constraint reflects the new relative prices, but keeps the agent on the original indifference curve. The income effect is then the change in the quantity of that good consumed when the budget constraint is shifted holding its slope constant to intersect with the new endowment point.
Classic Economic Models
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Balance of Payments
Endogenous Technical Change
Federal Funds (Fed Funds) Rate
Fixed Exchange Rate
Floating Exchange Rate
Gross Domestic Product (GDP)
Production Possibility Frontier
Reservation Wage Rate
Theory of the Consumer
Theory of the Firm
Velocity of Money