📚 Learning Guide
Understanding Demand and Supply
hard

Order the following steps to illustrate how a decrease in consumer income affects the demand for normal goods.

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Learning Path
Learning Path

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Choose the Best Answer

A

Demand for normal goods decreases

B

Consumer income decreases

C

Supply remains unchanged

D

Price of normal goods may decline due to lower demand

Understanding the Answer

Let's break down why this is correct

Answer

When consumer income decreases, people have less money to spend, which affects their buying choices. Since normal goods are items that people buy more of when they have more income, a drop in income leads to a decrease in demand for these goods. For example, if someone usually buys a new shirt every month but now has less money, they might decide to buy fewer shirts or choose cheaper options. As a result, stores may notice a decline in sales of these normal goods, leading them to adjust their prices or inventory. This chain reaction shows how closely linked consumer income is to the demand for normal goods.

Detailed Explanation

When people's income goes down, they have less money to spend. Other options are incorrect because This step happens after income decreases; Supply does not stay the same when demand changes.

Key Concepts

Demand and Supply
Elasticity of Demand
Market Equilibrium
Topic

Understanding Demand and Supply

Difficulty

hard level question

Cognitive Level

understand

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