Suppose the incomes of buyers in a market for a particular normal good decrease and there is also a reduction in input prices.What would we expect to occur in this market?

Question

Quizplus · Accepted Answer

The decrease in incomes of buyers would lead to a decrease in demand for the normal good, which would shift the demand curve leftward. At the same time, the reduction in input prices would lead to a decrease in the cost of production and thus an increase in supply, which would shift the supply curve rightward. The net effect on equilibrium price and quantity will depend on the relative magnitude of the shifts in demand and supply. However, we can infer that equilibrium price would decrease (due to lower demand) and the impact on quantity would be ambiguous, as it would depend on the relative magnitude of the shifts in demand and supply.

Suppose the Incomes of Buyers in a Market for a Particular