Your indifference curves for good X (horizontal axis) and good Y (vertical axis) are vertical lines because you do not gain any satisfaction from consumption of Y. As the price of X declines, the change in consumption of X is entirely composed of the:

Question

Quizplus · Accepted Answer

The income effect is the change in consumption of a good due to a change in real income. In this case, the price of X declines, which increases real income. As a result, the consumption of X will increase. The substitution effect is the change in consumption of a good due to a change in its relative price. In this case, the price of X declines, which makes it relatively cheaper than Y. As a result, the consumption of X will increase. However, since the indifference curves are vertical lines, the substitution effect is zero. Therefore, the change in consumption of X is entirely composed of the income effect.

Your Indifference Curves for Good X (Horizontal Axis) and Good