The Price Effect is the influence that the change in the price of a product has on the quantity demanded by consumers on a market or economy. The Price Effect is a fundamental concept in economics and can be an important analysis for businesses in setting the offering price of their goods and services. There are two main components of the Price Effect: Substitution Effect (means that the consumer is chose a less expensive product for maximising satisfaction as nominal income is fixed) and Income Effect (means when due to an increase in price the demand of a product falls for normal goods and is reverse for inferior goods).

Related Definitions in the Project: The Commercial Definitions