Why is the substitution effect strictly negative

Reference no: EM133595699

Problem: Draw a precise diagram (preferably with a pencil and scale/ruler) that shows the decomposition of the overall price effect into a substitution effect and an income effect. Why is the substitution effect strictly negative if a consumer is compelled to stay at the same level of utility? Mathematical derivations are not necessary, but ensure that you explain your answer with economic reasoning.

Reference no: EM133595699

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