FIGURE 4-3

-Refer to Figure 4-3. Starting with initial curves D₀ and S₀, which movement is consistent with an increase in both income and population, assuming that wool products are normal goods?

Question

FIGURE 4-3
 
-Refer to Figure 4-3. Starting with initial curves D₀ and S₀, which movement is consistent with an increase in both income and population, assuming that wool products are normal goods?

Quizplus · Accepted Answer

The movement from Point A to Point F is consistent with an increase in both income and population, assuming that wool products are normal goods. This is because Point F represents a higher quantity demanded for wool products, as both income and population increase, causing the demand curve to shift to the right from D₀ to D₁. At the same time, the supply curve shifts to the left from S₀ to S₁, reflecting a higher cost of production due to an increase in the price of wool inputs. The equilibrium point shifts from Point A to Point F, indicating a higher price and quantity traded for wool products.

FIGURE 4-3 -Refer to Figure 4-3. Starting with Initial Curves D₀ and Initial