tulosvaikutus

Tulosvaikutus, often translated as the income effect, is a fundamental concept in microeconomics that describes how a change in the price of a good or service affects the purchasing power of a consumer's income. When the price of a good falls, consumers effectively have more real income because they can buy the same amount of the good for less money. This increased purchasing power can then be spent on more of that good, or on other goods and services. Conversely, when the price of a good rises, consumers' real income decreases, and they can afford to buy less of that good and potentially other goods as well.

The income effect is one of two components that explain the total effect of a price change on the quantity demanded, the other being the substitution effect. The substitution effect captures the tendency for consumers to switch to relatively cheaper alternatives when the price of a good changes. The income effect, on the other hand, focuses solely on the change in consumption due to the alteration in real income. For normal goods, the income effect works in the same direction as the substitution effect, leading to an increase in quantity demanded when price falls and a decrease when price rises. However, for inferior goods, the income effect works in the opposite direction, meaning that as real income increases, demand for these goods decreases. Understanding the income effect is crucial for analyzing consumer behavior and predicting how changes in prices will impact market demand.