Refer to the graph below,showing the market supply and demand for a product.Assume that the market is initially in equilibrium where D₁ and S₁ intersect.If consumer incomes decreased and production costs increased,then new equilibrium would be at:

Question

Quizplus · Accepted Answer

A decrease in consumer income would result in a decrease in demand, and an increase in production costs would result in a decrease in supply. This would cause the demand curve to shift to the left from D₁ to DS2U1B11S2U1B0, and the supply curve to shift to the left from S₁ to SS2U1B13S2U1B0. The new equilibrium point would be where these curves intersect, at P₃ and Q₁.

Refer to the Graph Below,showing the Market Supply and Demand