two effects that occur jointly when the price of an item changes; an income effect is the change in consumer satisfaction that occurs when a price change for a particular item alters the income available to purchase other items; a substitution effect is the change in the quantity or mix of items purchased in response to the price change —note a substitution effect causes movement along an indifference curve (representing constant satisfaction) to a different mix of items, whereas an income effect shifts consumption to a different curve (representing a different satisfaction level) —see output and substitution effectsThis definition last updated 10/29/2008