Raymond owns Pederson's computer repair service. He has observed over the years that customers keep their older-model computers longer when the economy is doing poorly, creating demand for his maintenance and repair service. Raymond has observed the impact of ________ on demand for his service.
A)break-even points
B)the price inelasticity ratio
C)the income effect
D)the target return effect
E)cross-price elasticity

Question

Quizplus · Accepted Answer

The income effect refers to the impact of a change in consumer income on their demand for a particular good or service. In this case, Raymond has observed that when the economy is doing poorly (i.e. consumers have lower incomes), they tend to keep their older computers rather than purchasing new ones, resulting in higher demand for his repair and maintenance services.

Raymond Owns Pederson's Computer Repair Service