Apr 23 2012

Income effect

One explanation for the law of demand. Says that as the price of a good decreases, consumers feel as if they have more disposable income, thus tend to consumer more of the good whose price is falling. On the other hand, as the price of a good rise, real income decreases, consumers feel poorer, thus consume less of the good.


About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author
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