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How does customers' income affect the demand curve with normal goods?

a) Shifts the demand curve to the left
b) Shifts the demand curve to the right
c) Causes movement along the demand curve
d) No effect on the demand curve

User Esamatti
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1 Answer

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Final answer:

An increase in customers' income generally shifts the demand curve to the right for normal goods, due to positive income elasticity of demand, and to the left for inferior goods, due to negative income elasticity.

Step-by-step explanation:

When considering how customers' incomes affect the demand curve for normal goods, an increase in income typically shifts the demand curve to the right. This shift occurs because normal goods have a positive income elasticity of demand, meaning that as income grows, demand for these goods increases. The extent of the rightward shift in demand depends on the degree of income elasticity - a higher income elasticity indicates a more significant shift. Conversely, for inferior goods, which have a negative income elasticity of demand, an increase in income would shift the demand curve for those goods to the left.

User Demnogonis
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