What Is the Income Effect? The income effect, in microeconomics, is the resultant change in demand for a good or service caused by an increase or decrease in a consumer’s purchasing power or real income. As one’s income grows, the income effect predicts that people will begin to demand more (and vice-versa). So-called normal goods
What Is Income Elasticity of Demand? Income elasticity of demand refers to the sensitivity of the quantity demanded for a certain good to a change in the real income of consumers who buy this good. The formula for calculating income elasticity of demand is the percent change in quantity demanded divided by the percent change
What Is Per Capita Income? Per capita income is a measure of the amount of money earned per person in a nation or geographic region. Per capita income is used to determine the average per-person income for an area and to evaluate the standard of living and quality of life of the population. Per capita
What Is Income Risk? Income risk is the risk that the income stream paid by a fund will decrease in response to a drop in interest rates. This risk is most prevalent in the money market and other short-term income fund strategies (versus longer-term strategies that lock in interest rates). Income risk is an extension
What Is an Income Share? An income share is a class of shares offered by a dual-purpose fund. This share class pays out distributions and dividends to its investors. Income shares may also be known as preferred shares. Key Takeaways An income share is a class of shares offered by a dual-purpose fund; this share
What Is Income Shifting? Income shifting, also known as income splitting, is a tax planning technique that transfers income from high to low tax bracket taxpayers. It is also used to reduce the overall tax burden by moving income from a high to low tax rate jurisdiction. Key Takeaways Income shifting is also referred to as income
What Is Income Smoothing? Income smoothing uses accounting techniques to level out fluctuations in net income from one period to the next. Companies indulge in this practice because investors are generally willing to pay a premium for stocks with steady and predictable earnings streams as opposed to stocks whose earnings are subject to more volatile
What Is an Income Statement? An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period. The other two key statements are the balance sheet and the cash flow statement. The income statement focuses on the revenue, expenses, gains, and losses of a company during a particular
What Is Income Tax? The term “income tax” refers to a type of tax that governments impose on income generated by businesses and individuals within their jurisdiction. By law, taxpayers must file an income tax return annually to determine their tax obligations. Income taxes are a source of revenue for governments. They are used to
What Is Income Tax Payable? “Income tax payable” is a liability reported for financial accounting purposes that indicatesthe amount that an organization expects to pay in income taxes within 12 months. It is reported in the current liabilities section of a company’s balance sheet. The calculation of income tax payable is determined in accordance with
