Question

The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed. question 3 options:

Answer 1

The term income effect used in economics describes a situation where a higher price causes a reduction in the buying power of income, even though actual income has not changed.
It denotes the change in demand of a good or service as a result of a change in a consumer's discretionary income.