What is the income effect? ? economics

Income effect is a striking effect seen on consumption of goods resulting from consequence of changes in real income of individual.  

Explanation:

Income effect can be positive when the real income of individual increases i.e, consumers increase their consumption when the income increases. Income effect is negative when there is a decrease in real income of individuals. Income effect can be direct and indirect.

A direct income effect occurs when a consumer decides to reduce his consumption depending on his decrease in income. Income effect is indirect when a consumer decides to reduce consumption depending on others factors and not income. For example, food prices in restaurants may go up which leaves consumers to spend less income on other products, hence the consumer will decide not to dine out.

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.