The substitution effect is defined as the change in demand due to the change in the rate of exchange between x1 and x2. The change in the rate of exchange is due to a change in own price (p1). Furthermore, the SUBSTITUTION EFFECT ALWAYS HAS A NEGATIVE (-) SIGN. This means that the relationship between the rate of exchange (price) and the change in demand (quantity of x1) is inverse. In other words, when the price of a good increases, we will see a decrease in the quantity of said good consumed and vice versa. Naturally, then, the SE gives the slope of the demand curve when looking at the equation in its entirety. BE SURE to draw this as the first effect on the graph relative to the original budget constraint. The income effect is drawn last on the new budget constraint given new prices.