Homework Answers
Answer - d. An increase in income (assume that this is a normal good)
A shift of demand curve from D1 to D2 implies that there is an
increase in demand as the the demand curve is shifting to the right
hand side. Shifting of demand curve occurs when the price remains
constant and any other determinant of demand changes.
Income of the consumer is directly related to demand. More the
demand, more will be the demand. This rule is applicable on the
normal goods. If we assume the above diagram is for a normal good,
then an increase in the increase will definitely shift the demand
curve to the right indicating an increase in the demand.
The other options are incorrect because
a. A decrease in the price of substitutes will result to decrease in the demand and the demand curve will shift to left hand side.
b. More income, more demand rule will not be applicable on inferior goods.
c. Decrease in own price moves the demand on the same demand curve. It doesn't shift the demand curve.
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