Answer to Question 1
The substitution effect is the effect of a change in price on the quantity bought when the consumer (hypothetically) remains indifferent between the original situation and the new one.
Answer to Question 2
Two factors make inheritances a source of increased economic inequality: debts cannot be bequeathed and assortative mating. The law is that debts cannot be passed on to family members. As a result, only positive inheritances, which can add to a family's wealth increasing future generations' wealth, can be made. Most households receive either no inheritance or else a very small one; however, a few receive enormous inheritances. As a result, wealthy families tend to remain wealthy. In addition, assortative mating, the fact that people tend to marry within their own socioeconomic class, also leads to persisting inequality in wealth. In particular, wealthy people marry wealthy people, so that wealth is not passed to poorer families. As a result, inherited wealth becomes more concentrated in wealthy families.
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