reference to the other two terms in the Slutsky equation, which are observable. This process is sometimes known as the Hicks decomposition of a demand change. The equation can be rewritten in terms of elasticity: where εp is the (uncompensated) price elasticity, εph is the compensated price elasticity, εw,i the income elasticity of good i, and bj the budget share of good j. Overall, in simple words, the Slutsky equation states the total change in demand consists of an income effect and a substitution effect and both effects collectively must equal the total change in demand. The equation above is helpful as it represents the fluctuation in demand are indicative of different types of good. The substitution effect will always turn out negative as indifference curves are always downward sloping. However, the same does not apply to income effect as it depends on how consumption of a good changes with income. The income effect on a normal goods is negative, and if the price decreases, consequently purchasing power or income goes up. The reverse holds when price increases and purchasing power or income decreases, as a result of, so does demand. Generally, not all goods are "normal". While in an economic sense, some are inferior. However, that does not equate quality-wise that they are poor rather that it sets a negative income profile - as income increases, consumers consumption of the good decreases. For example, consumers who are running low of money for food purchase instant noodles, however, the product is not generally held as something people would normally consume on a daily basis. This is due to the constrains in terms of money; as wealth increases, consumption decreases. In this case, the substitution effect is negative, but the income effect is also negative. In any case the substitution effect or income effect are positive or negative when prices increase depends on the type of goods: However, whether the total effect will always be negative is impossible to tell if inferior complementary goods are mentioned. For instance, the substitution effect and the income effect pull in opposite directions. The total effect will depend on which effect is ultimately stronger. Derivation While there are several ways to derive the Slutsky equation, the following method is likely the simplest. Begin by noting the identity where is the expenditure function, and u is the utility obtained by maximizing utility given p and w.