Question

124. Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n):

A. decrease in income if X is an inferior good.
B. increase in the price of complementary good Y.
C. increase in money incomes if X is a normal good.
D. increase in the price of substitute product Y.

Answer 1

An increase in money incomes can cause a rightward shift in the demand curve if X is a normal good.

Step-by-step explanation:

A shift in the demand curve from D0 to D1 might be caused by an increase in money incomes if X is a normal good. When income increases, the demand for normal goods, which are goods that people buy more of as their income rises, also increases. This shift can be represented graphically as a rightward shift from D0 to D1. Other factors that can cause a shift in the demand curve include changes in tastes and preferences, the composition of the population, and the prices of related goods.