Consider an individual who consumes two goods, x and y.  Suppose the price of x falls. This price decline will influence the individual's consumption of x in two ways:
   1. THE SUBSTITUTION EFFECT: The consumer will have an incentive to substitute the now relatively cheaper x for the relatively more expensive y, consuming more x and less y until the relative value of x equals the new, lower opportunity cost of x.
                   Fall in Px/Py => fall in optimal MRS (= MUx/MUy).
Note: The substitution effect answers the question: What would happen to your consumption of x if its price changes and your real income (utility) is held constant instead of your money  income?
   2. THE INCOME EFFECT: The individual will adjust consumption of x in the process of moving to a higher attainable level of utility at the new, lower price of x.
                   Fall in Px/Py => increase in attainable U.
Note: The income effect answers the question: What will happen to your consumption of x as you move to a new level of welfare (utility) as a result of a price change?

Three possibilities arise:
             Case 1: Normal good                Case 2: Inferior good                 Case 3: Giffen good