(Answered) Define each effect that causes or explains the Law of Demand.Define each effect that causes or…

➤ How do changes in real income and purchasing power affect quantity demanded?
When price falls, real income rises because money buys more goods. That added purchasing power increases demand for normal goods and sometimes higher-quality items. For inferior goods, higher real income can reduce demand. The real-income channel therefore complements substitution in determining how demand responds to price changes.