Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Income is treated as an exogenous variable in the graphical analysis.

Question

Quizplus · Accepted Answer

In the given scenario, income is treated as an endogenous variable, not exogenous. This is because income is directly affecting the demand for a product and is a variable that can change due to market factors.

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