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when goods are perfect complements, a change in price leads to an income effect equal to...

when goods are perfect complements, a change in price leads to an income effect equal to the overall effect. When goods are perfect substitutes, a change in price leads to a substitution effect equal to the overall effect. Explain.

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Answer #1

When goods are perfect complements, each good is consumed in fixed proportion and thus when price of the good changes consumer does'nt substitute one good with the other and hence there is no substitution effect and the tptasl effect consists of the income effect only. When goods are perfect substitutes, if due to change in price, cosumer keeps on consuming the same good, then substitution effect is zero, but if due to price change, consumer substitutes one good with other, then income effect is zero and price effect is due to substitution effect only. Hence the above statement is false.

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