Use the following to answer questions :
Figure 3-1
-Given the supply and demand curves drawn for a normal good in Figure 3-1, an increase in income can be expected to cause:
A)equilibrium price and quantity to increase.
B)equilibrium price to increase and equilibrium quantity to fall.
C)equilibrium price to increase while equilibrium quantity holds steady.
D)equilibrium price and quantity to fall.
E)equilibrium price to fall and equilibrium quantity to climb.

Question

Use the following to answer questions :
Figure 3-1 
-Given the supply and demand curves drawn for a normal good in Figure 3-1, an increase in income can be expected to cause:
A)equilibrium price and quantity to increase. 
B)equilibrium price to increase and equilibrium quantity to fall. 
C)equilibrium price to increase while equilibrium quantity holds steady. 
D)equilibrium price and quantity to fall. 
E)equilibrium price to fall and equilibrium quantity to climb.

Quizplus · Accepted Answer

An increase in income would shift the demand curve to the right, leading to an increase in both equilibrium price and equilibrium quantity. This is because consumers are now willing and able to purchase more of the good at every price level.

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