The income effect is the concept that changes in consumption of a good result from changes in purchasing power.

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The income effect is a well-established economic concept that refers to the impact that changes in one's income or purchasing power will have on consumption patterns. When people have more money, they are more likely to purchase more goods and services, which can have a significant impact on the overall economy. The opposite is also true, as people with less money tend to cut back on their spending, which can have a negative effect on businesses and the larger economy as a whole.

The Income Effect Is the Concept That Changes in Consumption