ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price will decrease
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Price will increase
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Quantity will increase
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Quantity will decrease
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Detailed explanation-1: -Assume that consumer’s income and the number of sellers in the market for good X both falls. Based on this information, we can conclude with certainty that the equilibrium quantity will decrease.
Detailed explanation-2: -If the number of firms is fixed, when income of consumer will increase, the demand will also increase because the consumer would pay higher price but the supply will remain same, so there will be a rise in equilibrium price. As a result the demand curve will shift rightward.
Detailed explanation-3: -In case of normal goods income effect is positive which means with increase in income demand tends to rise whereas with decrease in income demand tends to fall. But, in case of inferior goods the income effect is negative with an increase in income the demand for inferior goods will reduce and vice versa.