When prices change and this makes customers financially better or worse off, this is called 'the income effect of the price change'.

Question

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The income effect of a price change refers to the change in consumers' purchasing power (and thus their real income) as a result of a change in the price of a good or service. When prices decrease, consumers can afford to buy more, making them financially better off, and vice versa.

When Prices Change and This Makes Customers Financially Better or Worse