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price effect and income effecti want to get some knowledge about price effect and...

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tj717 | Student, Undergraduate | eNotes Newbie

Posted October 9, 2009 at 12:47 AM via web

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price effect and income effect

i want to get some knowledge about price effect and income effect.

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krishna-agrawala | College Teacher | Valedictorian

Posted October 19, 2009 at 7:51 PM (Answer #2)

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I have not come across the term "price effect" in economics. However, I am aware of a concept called "income effect of a price change". It refers to the fact that when the price of a good changes it has the effect of changing the real income of buyers. When price of a good reduces, the buyer are able to buy the same quantity of the good with less money. This saves them some money which can be used to buy more of the same good or other goods. This amounts to net increase in their real income. In a similar way decrease in price of a good results in reduction of real income of buyers.

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grgsiocl | Teacher | Honors

Posted October 20, 2009 at 6:14 AM (Answer #3)

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One arranges different effects of the price of a property into the economics and consumer sociology on the consumption (therefore it also: Nachfragerverhalten). The different effects are not to be understood excluding. The demand curve is regarded, partially by certain groups of the society. The terms emerge frequently in the market study, public opinion poll and trend research.

The price effect faces the income effect. Both effects can be regarded by the Slutsky dismantling separately.

One differentiates:

  • Substitution effect: The always clear substitution effect shows the effects of a price adjustment with hypothetically real income constantly held (or use).
  • Volume daring on effect or effect: The music car effect (also volume daring on effect or effect) is a price effect, which describes that humans (e.g. consumers) align their behavior at the surrounding field noticed by them.

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