Income effect measures the change in the amount demanded due to the change in the real income of the consumer resulting from the change in price.

a) When the price falls:

Real income of the consumer rises.

Purchasing power of the consumer increases.

Consumer, therefore, demands more of the commodity than before.

b) When the price rises:

Real income of the consumer decreases.

Purchasing power of consumer decreases.

Consumer, therefore, demands less of the commodity than before.