Ogden to consume fewer haircuts. As shown in Figure B4, in this particular example the substitution effect and

income effect on Ogden’s consumption of haircuts are offsetting—so he ends up consuming the same quantity

of haircuts after the price increase for pizza as before.

The size of these income and substitution effects will differ from person to person, depending on individual

preferences. For example, if Ogden’s substitution effect away from pizza and toward haircuts is especially

strong, and outweighs the income effect, then a higher price for pizza might lead to increased consumption of

haircuts. This case would be drawn on the graph so that the point of tangency between the new budget

constraint and the relevant indifference curve occurred below point B and to the right. Conversely, if the

substitution effect away from pizza and toward haircuts is not as strong, and the income effect on is relatively
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