The consumer is initially at A on the budget line RS, thereby obtaining level of utility associated with the curve of indifference U1. When the price of food falls the budget line rotates outwards to line RT. The consumer now chooses to consume market basket B on the indifference curve U2.and the consumption increases (consumption of food) by F1F2 (i.e. from 0F1 to 0F2) While the consumption of clothing declines as represented by line segment C1C2 (i.e. from 0C1 to 0C2)
The substitution effect
can be measured by drawing a budget line parallel to the new budget line RT (reflecting the lower relative price of food) but that is just tangent to the original indifference curve. Thus holding the level of utility constant. Given the budget line, the consumer chooses market basket C and consumes 0E units of goods. Therefore line segment F1E represents the substitution effect (move from A to C)
The income effect.
EF2 (associated with the move from C to B) keeps relative prices constant but increases real income (satisfaction) => Food is a normal good because the income effect EF2 is positive.
Income and substitution effects.
Substitution and income effects for a normal goods work in the same direction (positive)
For inferior goods the income and substitution effects move in opposite direction