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). Price and income together must change in order to create a shift in the demand curve.

Question

Quizplus · Accepted Answer

The demand curve is typically illustrated with quantity on the horizontal axis and price on the vertical axis. A shift in the demand curve can be caused by factors other than price and income, such as changes in consumer preferences, prices of related goods, or expectations of future prices. Changes in income can shift the demand curve, but it is not necessary for both price and income to change to cause a shift in the demand curve.

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