Question

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. This is an example of how _______ impacts demand for products.

Answer 1

This is an example of how THE INCOME EFFECT impacts demand for products.

Step-by-step explanation:

In economics, the income effect refers to how real income is affected by price changes. For example, if the price of a normal good decreases, consumers will be able to purchase larger quantities with the same amount of money, so the income effect is positive. On the other hand, if the price of goods increases, consumers will be able to purchase a smaller quantity of goods with the same amount of money, so the income effect is negative.

In this case, when the income level decreases, consumers will purchase cheaper products in order to maintain similar quantities.