📚 Learning Guide
Shifts in Demand Curve
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If 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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Learning Path
Learning Path

Question & Answer
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Choose the Best Answer

A

The demand curve shifts to the left

B

The demand curve remains unchanged

C

The demand curve shifts to the right

D

The demand curve becomes vertical

Understanding the Answer

Let's break down why this is correct

Answer

When consumers’ incomes rise, they can afford more of a normal good, so the quantity demanded at each price level goes up. This causes the entire demand curve to shift outward to the right. The reason is that a higher income increases the consumer’s purchasing power, making the good more attractive. For example, if people earn more and decide to buy more coffee at every price, the coffee market’s demand curve moves to the right.

Detailed Explanation

When people have more money, they can buy more of the good at every price. Other options are incorrect because Some think higher income means people buy less; Income change does affect demand.

Key Concepts

income effect
increase in demand
Topic

Shifts in Demand Curve

Difficulty

medium level question

Cognitive Level

understand

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