The change in the quantity of a product demanded by consumers because of a change in their earnings is called the:
A)substitution effect.
B)experience curve effect.
C)leader pricing effect.
D)markdown effect.
E)income effect.

Question

Quizplus · Accepted Answer

The change in consumers' earnings can affect their purchasing power and, as a result, impact the quantity of a product they demand. This effect is referred to as the income effect. It occurs when the increase or decrease in income changes the quantity demanded of a product or service, holding the price of the product or service constant.

The Change in the Quantity of a Product Demanded by Consumers