The diagram illustrates budget lines and an indifference curve. The consumer’s starting position is T. The price of good X then decreases.
- AT to Q represents perfect elasticity; T to P represents a Giffen good
- BT to R represents an income effect; R to S represents a substitution effect
- CT to U represents a substitution effect; T to Q represents a normal good
- DT to U represents a substitution effect; U to P represents an income effect