Income+Effect

Income effect describes the effects of changes in prices on overall consumption. An increase in price can leave a buyer feeling like he has less money. On the contrary, a decrease in price will leave the buyer feeling wealthier. Although the buyers income has not changed, the market price makes the buyer feel it has. The pricing of goods, however, depends on what kind of goods are offered.

Typically, the income effect is positive for normal goods. When a good is labeled as inferior, the income effect is almost always negative. Although inferior goods are negative, this is almost always offset by the substitution effect so lower prices mean higher consumption. This is true unless in a rare case it is a giffen good.

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http://www.sparknotes.com/economics/micro/supplydemand/demand/terms/term_18.html http://moneyterms.co.uk/income-effect/ http://www.investopedia.com/terms/i/incomeeffect.asp

Question: Typically, an inferior good will be positive or negative? Answer: Negative