Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The demand curve shifts to the left due to decreased purchasing power.
B
The demand curve shifts to the right because consumers can afford to buy more.
C
The demand curve remains unchanged as income does not affect demand.
D
The demand curve shifts to the right for inferior goods only.
Understanding the Answer
Let's break down why this is correct
Answer
When consumers earn more, they can afford to buy more of normal goods, so the demand curve shifts to the right. This happens because the extra income raises each buyer’s purchasing power, making the good more attractive at every price level. Consequently, at every price, the quantity demanded increases. For example, if a family’s income rises from $30,000 to $40,000, they might buy 10 more units of a normal good like coffee at each price point.
Detailed Explanation
When people earn more, they can buy more of normal goods. Other options are incorrect because Some think more money means less buying power, but that is wrong; Income does affect demand.
Key Concepts
demand curve
income effect
increase in demand
Topic
Shifts in Demand Curve
Difficulty
hard 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
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2
Question 2Which of the following events would most likely cause a rightward shift in the demand curve for a normal good?
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3
Question 3If 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?
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4
Question 4How does a decrease in consumer income typically affect the demand for inferior goods?
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Practice
5
Question 5A sudden increase in consumer income leads to a shift in the demand curve for luxury cars. Which of the following best explains this change?
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6
Question 6When consumer preferences shift in favor of a product, this results in a(n) __________ of the demand curve for that product.
easyEconomics
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7
Question 7Increase in consumer income : outward shift in demand curve :: decrease in consumer preferences : ?
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8
Question 8Which of the following factors can cause a shift in the demand curve for a product? Select all that apply.
easyEconomics
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9
Question 9Arrange 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.
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Practice
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