Difference between revisions of "Income Effect"
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| − | The Income Effect is the effect that occurs when the price of a good you buy decreases, such that the money you save actually increases your income. For example, if you drink a gallon of milk each week and the price of that gallon decreases by 25 cents, then you have 25 cents extra to spend on something else. It is as though your income went up by 25 cents. | + | The Income Effect is the effect that occurs when the price of a [[good]] you buy decreases, such that the money you save actually increases your income. For example, if you drink a gallon of milk each week and the price of that gallon decreases by 25 cents, then you have 25 cents extra to spend on something else. It is as though your income went up by 25 cents. |
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Revision as of 12:54, March 11, 2007
The Income Effect is the effect that occurs when the price of a good you buy decreases, such that the money you save actually increases your income. For example, if you drink a gallon of milk each week and the price of that gallon decreases by 25 cents, then you have 25 cents extra to spend on something else. It is as though your income went up by 25 cents.