Concepts of Income and Substitution Effects: 

Change in demand for a good due to one unit change in price of that good for given prices and money income is known as own price effect for that good. Thus, own price effect =dx₁/dp₁ and it consists of own substitution effect and income effect for a price change. 

Own Substitution Effect: Change in demand quantity for a good (say x₁) due to change in its own price under constant real income (in terms of utility) is called substitution effect for that good and can be written as  

Income Effect: Income effect for a good (say x1) represents change in demand quantity for that good for a change in real income. So income effect = ()ipdxdM , which is positive for a normal good, negative for inferior good and zero for neutral good. 

Income Effect For A Price Change: For given money income, as price of any one good change one unit then real income (M/pi) changes for which demand for the good changes by income effect. It is known as income effect for a price change. Thus, income effect for a price change = . Note that income effect and income effect for a price change have opposite sign and different magnitude.