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.
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.
An increase in the income of the buyers of a normal commodity will cause an increase in the demand for the normal commodity. As a result, the demand curve of the commodity will shift to the right. The equilibrium price and equilibrium quantity both increase.
In this diagram, the original demand curve DD and the original supply curve SS intersect at point E and determine equilibrium price equal to OP0 and equilibrium quantity OQ0, Now due to an increase in demand, demand curve shifts to the right, i.e., DD to D1D1. The new demand curve D1D1 intersects the given supply curve SS at point E1 where new equilibrium price is OP1 and new equilibrium quantity is OQ1.
An increase in the income of the buyers of a normal commodity will cause an increase in the demand for the normal commodity. As a result, the demand curve of the commodity will shift to the right. The equilibrium price and equilibrium quantity both increase.
In this diagram, the original demand curve DD and the original supply curve SS intersect at point E and determine equilibrium price equal to OP0 and equilibrium quantity OQ0, Now due to an increase in demand, demand curve shifts to the right, i.e., DD to D1D1. The new demand curve D1D1 intersects the given supply curve SS at point E1 where new equilibrium price is OP1 and new equilibrium quantity is OQ1.
