Sales of national brands of orange juice tend to increase when the economy is doing well,while sales of generic orange juice increase when the economy is not doing well.Among industry members this is called the "orange juice indicator." This is an example of how ____________ impacts demand for products.
A) the substitution effect
B) the price inelasticity coefficient
C) the income effect
D) the target return effect
E) cross-price elasticity

Question

Quizplus · Accepted Answer

The "orange juice indicator" illustrates how changes in the overall economy (specifically changes in consumers' income levels) impact demand for specific products. As consumers' incomes rise, they may be more likely to purchase higher-priced national brands of orange juice. On the other hand, when the economy is not doing well, consumers may switch to purchasing lower-cost generic orange juice. This phenomenon is an example of the income effect on demand.

Sales of National Brands of Orange Juice Tend to Increase