-Let supply remain constant at S; a decrease in income causes consumers to be willing and able to purchase 150 fewer units at each price than they were previously.

Question

Quizplus · Accepted Answer

Since the decrease in income causes consumers to purchase 150 fewer units at each price, the demand curve shifts leftward to D1. The new equilibrium point will be the intersection of S and D1, which is at a lower price and quantity than the original equilibrium point. Looking at the graph, the best choice for the new equilibrium price and quantity is D, which is P = $5 and Q = 200.

-Let Supply Remain Constant at S; a Decrease in Income