Determine the Income Effect of law of demand
As a result of fall in the price of a commodity, real income of its consumer increase at least in terms of this commodity. Or we can say, his/her purchasing power increases because he is required to pay less for the same quantity. Increase in real income (or purchasing power) encourages demand for the commodity with decreased price. Increase in demand on account of increase in real income is called as income effect. It must however be noted that income effect is negative in case of inferior goods. Just in case, price of an inferior good accounting for a considerable proportion of total consumption expenditure falls considerably, consumers' real income increases: they become relatively richer. Therefore they substitute the superior good for the inferior ones, which means they decrease the consumption of inferior goods. So the income effect on the demand for inferior goods becomes negative.