which statement about demand and supply is true? multiple choice question. an increase in consumer income shifts the demand curve to the left. an increase in the price of a good is likely to decrease the supply of the good. an increase in the price of a good shifts the supply curve to the left. an increase in consumer income is likely to increase the demand for a normal good.
The Correct Answer and Explanation is :
The correct answer is: An increase in consumer income is likely to increase the demand for a normal good.
Explanation:
In economics, the laws of demand and supply describe how the quantity of a good or service that consumers are willing to buy or producers are willing to sell responds to changes in price, income, or other factors.
- An increase in consumer income shifts the demand curve to the left: This statement is incorrect. When consumer income increases, the demand for normal goods typically increases because people have more money to spend. For normal goods, an increase in income shifts the demand curve to the right, not to the left. The demand curve shifts to the right because consumers are now willing to purchase more of the good at each price.
- An increase in the price of a good is likely to decrease the supply of the good: This statement is incorrect. In most cases, an increase in the price of a good leads to an increase in the quantity supplied, as producers are more willing to supply a good at a higher price due to the potential for greater profit. This is reflected by a movement along the supply curve, not a shift of the supply curve. The supply curve itself would shift to the right if there were an improvement in technology or a decrease in production costs, and to the left if there were higher input costs.
- An increase in the price of a good shifts the supply curve to the left: This statement is incorrect. Price changes lead to a movement along the supply curve (from one point to another), not a shift of the curve itself. The supply curve shifts when factors such as production costs or technology change. If prices increase and other factors remain constant, the quantity supplied will increase (movement along the curve).
- An increase in consumer income is likely to increase the demand for a normal good: This statement is correct. For normal goods, which are goods that people buy more of as their income increases (such as clothing, electronics, or dining out), a rise in income shifts the demand curve to the right, indicating an increase in demand.
In summary, the relationship between income and demand for normal goods is a key factor that explains why an increase in consumer income generally leads to increased demand for these goods.