Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increase in demand due to higher purchasing power
B
Decrease in supply of luxury goods
C
Price decrease of luxury goods
D
Increase in consumer population
Understanding the Answer
Let's break down why this is correct
Answer
The rise in consumer income makes luxury goods more affordable and attractive, so people want to buy more of them. This higher willingness to buy shifts the demand curve for those goods to the right. As a result, the equilibrium price and the quantity sold both rise. For example, if people suddenly earn more money, they might buy a new designer handbag that they previously could not afford, pushing the market price up and the sales volume higher. Thus, the change in equilibrium is driven by the income effect that increases demand.
Detailed Explanation
More money lets people buy more luxury items. Other options are incorrect because Some think a smaller supply makes buyers want more; Others think a lower price causes the rise.
Key Concepts
Market Equilibrium
Demand and Supply
Consumer Behavior
Topic
Market Equilibrium Analysis
Difficulty
medium level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1How does an increase in consumer income typically affect the market demand for luxury goods?
easyEconomics
Practice
2
Question 2How does an increase in consumer income typically affect the demand curve for normal goods, and what is the underlying reason for this shift?
hardEconomics
Practice
3
Question 3A sudden increase in consumer income leads to a shift in the demand curve for luxury cars. Which of the following best explains this change?
mediumEconomics
Practice
4
Question 4If the price of a product decreases and the quantity demanded increases significantly, what could be a primary reason for this scenario occurring?
easyEconomics
Practice
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