Refer to the figure below: Let supply remain constant at S; a decrease in income causes consumers to be willing and able to purchase 150 fewer units at each price than they were previously.

Question

Refer to the figure below:  Let supply remain constant at S; a decrease in income causes consumers to be willing and able to purchase 150 fewer units at each price than they were previously.

Quizplus · Accepted Answer

Since the decrease in income causes consumers to be willing and able to purchase 150 fewer units at each price than they were previously, the demand curve shifts leftward from D0 to D1. The new equilibrium price and quantity will be where the new demand curve (D1) intersects with the supply curve (S). This gives us a price of $5 and a quantity of 200, so the answer is D.

Refer to the Figure Below: Let Supply Remain Constant