Final answer:
The income effect for bananas after a price change measures the change in consumers' purchasing power, and the substitution effect reflects their tendency to switch to cheaper alternatives. Both effects combined determine the overall impact on demand.
Step-by-step explanation:
To calculate the income effect for bananas after a price change, you need to assess how the change in price alters the consumer's purchasing power. If the price of bananas decreases, consumers can buy more bananas or other goods with the same amount of income, effectively increasing their real income. Conversely, if the price of bananas increases, the consumer's ability to purchase goods decreases, reducing their real income.
The substitution effect occurs when consumers replace more expensive goods with cheaper alternatives. If the price of bananas rises, consumers may switch to other fruits like apples or oranges. The combination of the income and substitution effects determines the overall change in quantity demanded when there is a change in the price of a good.