Explain the effect of increase in income of byers of a'normal' commodity on its equilbrium price.

Explain the effect of increase in income of byers of a'normal' commodi

1.	Explain the effect of increase in income of byers of a'normal' commodity on its equilbrium price.
Answer» Solution :An increase in income of buyers will increase the demand for normal goods at the given price. It will lead to excess demand. This LEADS to competition AMONG buyers, which raises the price. Increase in price leads to rise in supply and fall in demand. These changes continue TILL supply and demand become EQUAL at a new EQUILIBRIUM price. As there is an increase in demand only, equilibrium price rises.