The income effect is a shift in consumer spending based on income.

This

indicates that as consumers' income increases, they generally spend more, while

when their income is low, they generally spend less. However, the influence has no

significant impact on the kind of items bought by consumers. Depending on their

circumstances and preferences, they may decide to buy more expensive items in

smaller amounts or cheaper goods in larger quantities. According to the budget

constraint framework, when income or prices change, a variety of actions are

conceivable. When family income rises, they demand more normal goods while

purchasing less good quality products. When the price of a commodity rises,

families usually desire less of that good—whether a significantly lower quantity or

simply a little lower quantity depends on personal preferences. Furthermore, a

greater price for one product might lead to more or less demand for the other good.

Income effects might be direct or indirect. When a customer chooses to modify

their spending habits as a result of a change in income, the income effect is

considered to be direct. For example, if a consumer's income has decreased, they

may opt to spend less on clothes. When a consumer is compelled to make

purchasing decisions based on reasons unrelated to their income, the income effect

becomes indirect. Food costs, for instance, may increase, leaving the consumer

with less money to spend on other things. This may cause them to reduce their out-

of-home meals, resulting in an indirect revenue effect. To sum up, income effect
has significant impact on neither consumer preferences and decisions nor the

market. Consumers' available options and amount of spending vary in tandem with

changes in income