A market is in equilibrium. What will happen to the equilibrium price and quantity following an increase in income and a fall in the costs of production?

Question

Quizplus · Accepted Answer

An increase in income typically increases demand, shifting the demand curve to the right, while a fall in production costs increases supply, shifting the supply curve to the right. The equilibrium quantity will rise, but the effect on price is uncertain as it depends on the relative magnitudes of the shifts in demand and supply.

A Market Is in Equilibrium