Explain the effect of the following changes on equilibrium price and quantity of a commodity: (a) increase in average incomes. (b) increase in population
If average incomes rise, consumers will purchase more of most goods. That is, increases in income normally shift demand curves outward to the right. The equilibrium price and quantity both rise.
A larger population will presumably want to consume more of a commodity, even if the price of that commodity and average incomes do not change, thus shifting the entire demand curve to the right. The equilibrium price and quantity both rise.
You might also like to view...
Refer to the table below. The total fixed cost of production is:
A. $10
B. $20
C. $98
D. $0
Incomes for adults vary widely across race and gender in the United States. These differences could be due to:
A. discrimination. B. education. C. choice of occupation. D. All of these can explain the differences.