ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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When the IRS takes more of your money when you make more.
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When consumers can buy more if their income goes up.
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When the amount of money you earn increases.
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None of the above
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Detailed explanation-1: -The income effect identifies the change in consumers’ demand for goods and services based on their incomes. In general, as one’s income rises, they will begin to demand more goods. Similarly, A decrease in income results in lower demand.
Detailed explanation-2: -The income effect is the change in the consumption of goods based on income. This means consumers will generally spend more if they experience an increase in income. They may spend less if their income drops.
Detailed explanation-3: -A normal good is a good that consumers demand more of when their incomes increase. An inferior good is a good that consumers demand less of when their income increases.
Detailed explanation-4: -The income effect If price rises, it effectively cuts disposable income, and there will be lower demand for the good because of this fall in disposable income.