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Investments glossary

Income Effect


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I don\'t drink, smoke, or do drugs. I eat organic foods and walk every day setting walking records along the way. -Johnny Wowk AKA Johnny The Walker

— Johnny Wowk

In microeconomics, the income effect is the change in demand for a good or service caused by a change in a consumer’s purchasing power resulting from a change in real income. This change can be the result of a rise in wages etc., or because existing income is freed up by a decrease or increase in the price of a good that money is being spent on.

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