Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
People are now willing to buy more luxury cars at every price level.
B
The price of luxury cars has decreased, making them more affordable.
C
Consumers have less interest in luxury brands, causing a decrease in demand.
D
The availability of cheaper alternatives has increased.
Understanding the Answer
Let's break down why this is correct
Answer
When people suddenly have more money, they can afford goods that were once too expensive for them. Luxury cars are a type of normal good that people buy more of when their income rises. The extra income makes the cars more attractive, so buyers increase their quantity demanded at each price. As a result, the entire demand curve moves to the right, showing a higher quantity demanded at every price level. For example, if a family’s income jumps from $50,000 to $70,000, they might now consider buying a $40,000 car they previously avoided, shifting the demand curve for luxury cars outward.
Detailed Explanation
When people earn more, they have extra money to spend. Other options are incorrect because A lower price would only make people buy more cars along the existing curve, not shift the curve; Higher income usually makes people want more luxury items, not less.
Key Concepts
Shifts in Demand Curve
Consumer Income Effects
Luxury Goods
Topic
Shifts in Demand Curve
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 2If consumers experience an increase in income, leading to a rise in their purchasing power, which of the following scenarios best describes the impact on the demand curve for a normal good?
mediumEconomics
Practice
3
Question 3How 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
4
Question 4If a sudden increase in consumer income leads to a higher quantity demanded for luxury goods, what is the underlying cause of this change in market equilibrium?
mediumEconomics
Practice
5
Question 5Increase in consumer income : outward shift in demand curve :: decrease in consumer preferences : ?
easyEconomics
Practice
6
Question 6Which of the following factors would cause a rightward shift in the demand curve for a luxury car?
easyEconomics
Practice
7
Question 7Arrange the following factors that can shift the demand curve in the correct order of their impact on consumer demand: A) Change in consumer preferences, B) Change in income, C) Change in prices of related goods, D) Change in population size.
mediumEconomics
Practice
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.