In economics the effect of income is concerned, as a production system to the change in the quantity demanded by the effect of the actual income received by the organization. When reference is made to the quantity demanded, it is meant what the productive unit launches on the market, either products or services. as long as all the other economic variables involved remain the same, such as the price of what is offered and the monetary income.
An income effect takes place when an economic production system is affected by the change in demand, as it increases or decreases due to the perception of real income from the activity. The effect can be both negative and positive, it will depend on the fluctuation of the amount of demand.
For a productive unit, income effects mean a situation in which managerial and directional decisions must be made that favor the organization or that place it in contingency to withstand a possible negative change. However, income effects are necessary for every productive unit.
For such an effect to exist, several conditions must be met that are linked to the variables found within the economic system of production, including price and money income. The first must be the same, both for own goods or services and those found in the market; and the second must be kept constant as a flow that does not vary, thus representing an increase in production or the opposite.
