Question

Which phrase describes the income effect?

A. The effect of demand and supply on income earned by producers
B. The impact of price on consumers’ purchasing ability and decisions
C. The increased income earned by suppliers because of high prices
D. The impact of consumers’ income on the supply of a product

Answer 1

Step-by-step explanation:

The income effect is the impact that a change in the price of a product has on a consumer's real income and consequently on the quantity demanded of that good.