Final answer:
When the size of the population increases and incomes rise, the demand curve for most goods shifts to the right. This indicates that a higher quantity is demanded at every price level, reflecting increased purchasing power among consumers.
Step-by-step explanation:
When considering the impact of a population increase on the demand for most goods, it is generally expected that the demand curve will shift. Let's take the example where an economy grows, and as a result, more people have higher incomes. This increase in income allows for goods, such as cars, which may have been previously unaffordable, to now be within reach for a larger portion of the population. The original demand curve Do is based on the assumption of ceteris paribus, meaning that all other economic factors remain constant. However, with the given scenario of an increase in population and rise in income, these assumptions no longer hold. The result is that for most goods, the demand at each price level increases, resulting in a shift of the demand curve to the right. This graphical representation can be seen as the demand curve moving horizontally to the right from its original position, which indicates an overall increase in the quantity demanded across different price levels.
Effects of Income on Demand Curve
Let's take cars as an example to illustrate this shift graphically. Before the rise in incomes, at a certain price level, a specific quantity of cars would be demanded. After the income increase, at the same price level, more people are now able to afford cars, hence the quantity demanded at that price is higher. This change is represented as a new demand curve, labeled D1, which lies to the right of the original demand curve, Do. This rightward shift indicates that, given the same price level, a larger quantity is now demanded due to the higher income levels among the expanded population. Conclusively, with an increase in the population and in turn, an increase in income, the demand for most goods will generally rise, reflected by a rightward shift in the demand curve. This is a fundamental concept in understanding how market dynamics adjust to changes in economic factors influencing consumer purchasing power.