The "income-effect" is best described as the:
A)effect on demand for a good brought about by a change in money income regardless of the changes in prices.
B)effect on demand for a good induced by a change in real income.
C)change in consumer preferences effected by a redistribution of income.
D)effect on demand for a good induced by a change in the market price of the good.
E)none of the above.

Question

Quizplus · Accepted Answer

The income-effect is the change in demand for a good or service resulting from a change in real income. Real income is a person's nominal income adjusted for inflation. As real income increases, people can afford to buy more goods and services at the same prices, and the demand for the goods and services increases.

The "Income-Effect" Is Best Described as The