How are equilibrium price and quantity affected when income of the consumers increase and decrease?

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Solution

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.

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Similar questions

How are equilibrium price and quantity affected when income of the consumers

(a) increase

(b) decrease

How are equilibrium price and quantity affected when the income of the consumers

(a) increase

(b) decrease?

How are the equilibrium price and the equilibrium quantity of a normal commodity affected by an increase in the income of its buyers? Explain with the help of a diagram.

Q. How will an increase in the income of the buyer of an inferior good affect its equilibrium price and equilibrium quantity? Explain with the help of a diagram.

How are the equilibrium price and quantity affected when demand and supply curves shift in the opposite direction?

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