Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Qd (P, I). Income is not represented on one of the axes, and so is treated as an exogenous variable in the graphical analysis.

Question

Quizplus · Accepted Answer

Demand is affected by both price and income, but only price is represented on the vertical axis. Therefore, income is treated as an exogenous variable in the graphical analysis.

Suppose That We Illustrate Demand and Supply with Quantity on the Horizontal