What is the verbal and graphic susbstitution effect when the price of an inferior good increases?
substitution effect is basically the idea that when the price of a good rises, the demand for a substitute of that good will rise. Let’s take Pilot and Bic pens for example. They are both pens, and frankly quite close substitutes. Therefore, if the price of Pilot pens suddenly quadrapled, we would be spending so much more than if we just bought the cheaper Bic pens, which to us are similar in function and give us a similar sense of satisfaction. Therefore, when the price of Pilot pens rises, the demand for Bic pens goes up. This is for normal goods.
