📚 Learning Guide
Shifts in Demand Curve
hard

How does an increase in consumer income typically affect the demand curve for normal goods, and what is the underlying reason for this shift?

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Choose 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

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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

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