Endowment income effect

[Rajat]

can someone please explain the difference between endowment income effect and ordinary effect ?
If we say that starting off with an endowment set is equivalent to starting off with money of equivalent value, why are the effects identified differently ?

[Rajat]

Put another way, my basic doubt is ..
Once i have entered a market and made my buying/selling choices, i go to a new set say X from W (my initial endowment set) .. After this, whatever changes happen in the market prices, the only effects that remain are purely substitution and income effect . There is no endowment with me now.. Then where does the question of endowment income effect arise ?
Once i have made my choices and reached set X, it is as good as having started with endowment-equivalent-amount of money and having reached set X

[ABHI1994]

total value of your endowment will also change this  is from where it basically come in to effect

On 21 April 2015 at 10:04, Rajat [via Discussion forum] <[hidden email]> wrote:

Put another way, my basic doubt is ..
Once i have entered a market and made my buying/selling choices, i go to a new set say X from W (my initial endowment set) .. After this, whatever changes happen in the market prices, the only effects that remain are purely substitution and income effect . There is no endowment with me now.. Then where does the question of endowment income effect arise ?
Once i have made my choices and reached set X, it is as good as having started with endowment-equivalent-amount of money and having reached set X

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[Rajat]

but what about this thought process as given below:

I start with endowment W , then move to -------------> set X ..... now price changes... so for the next stage, X becomes my new endowment set, Set W does not hold any meaning anymore.... Whatever price changes happen, cause me to move--------- > from X to Y

X----> Y is purely substitution and income effect . what is the endowment effect in this ?

[masteryoda2015]

When you treat like that you are by default considering that your income effect is due to endowment income + ordinary income effect. The case that you discuss is a static comparison. You do not describe the method as to how he reaches X to Y. there may be in fact be cases where X can go to Y where endowment income effect is zero (Case where the person is indifferent to selling or buying of good 1).

Endowment Income Effect comes from the fact that you have certain capital or labour that you would sell in market and get income. If the price of that labour goes down or up, it will bound to change your endowment and hence your Demand.

Assume that you work at firm for 8 hours a day and the firm has a policy of giving 4$ extra for every hour late you stay back. And assume that your leisure is not affected if you stay back 1-2 hours. Then on the day's that you stay back an extra hour, you gain 4$ income to spend more on your consumption. There is no substitution effect or ordinary income effect. There is only an endowment income effect. Your extra free hour is getting.