Demand curve shifts
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When any factor that influences buying plans, other than the price of the good, changes, there is a change in demand for that good. When the quantity of the good that people plan to buy changes at each and every price, there is a new demand curve. These factors include changes in income, number of consumers in the market, changes in the price of a related good, etc.
Assume the graph below reflects demand in the automobile market. Which arrow best captures the impact of increased consumer income on the automobile market?
Answer: D. Income is a shift factor of demand. An increase in income increases the number of automobiles demanded at each price. Therefore demand has shifted to the right.
- When demand increases, the quantity that people plan to buy increases at each and every price, so the demand curve shifts rightward.
- When demand decreases, the quantity that people plan to buy decreases at each and every price, so the demand curve shifts leftward.