Final answer:
The duality of effects refers to the fact that each transaction can have both substitution and income effects simultaneously.
Step-by-step explanation:
The duality of effects refers to the fact that each transaction can have both substitution and income effects simultaneously.
Substitution effect refers to the change in quantity demanded of a good when its price changes, assuming all other factors, including income, remain constant. When the price of a good decreases, consumers tend to buy more of it and less of the substitute goods, leading to an increase in the quantity demanded.
Income effect refers to the change in quantity demanded of a good due to changes in income caused by variations in the purchasing power of consumers. It occurs when the price of a good changes and affects the consumer's ability to purchase other goods. When the price of a good decreases, consumers' purchasing power increases, and they are able to afford more of that good and other goods, leading to an increase in the quantity demanded.