📚 Learning Guide
Understanding Demand and Supply
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How does an increase in consumer income typically affect the equilibrium quantity of a normal good in a market, considering other factors affecting demand are constant?

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Choose the Best Answer

A

It decreases the equilibrium quantity

B

It increases the equilibrium quantity

C

It has no effect on the equilibrium quantity

D

It causes a shift in the supply curve

Understanding the Answer

Let's break down why this is correct

Answer

When consumer income increases, people generally have more money to spend, which often leads to an increase in demand for normal goods. Normal goods are items that people buy more of when they have more income, like new clothes or dining out at restaurants. As demand for these goods rises, the demand curve shifts to the right, meaning at every price level, consumers want to buy more. This shift usually leads to a higher equilibrium quantity in the market, as sellers respond by supplying more of the good to meet the increased demand. For example, if a popular brand of shoes sees an increase in consumer income, more people may want to buy those shoes, resulting in more pairs being sold.

Detailed Explanation

When people have more money, they can buy more things. Other options are incorrect because Some might think that more income means less demand; It's a common mistake to think income changes don't matter.

Key Concepts

Equilibrium Quantity
Factors Affecting Demand
Topic

Understanding Demand and Supply

Difficulty

medium level question

Cognitive Level

understand

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