InterviewSolution
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InterviewSolution
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Give a reason for each of the following: (a) The demand for a good increase when the income of the consumer increases. (b) X and Y are substitute goods. A rise in the price of X results in the rightward shift of the demand curve of Y |
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Answer» (a) The income of the consumer determines the purchasing power of the consumer. There is a direct relationship between the income of the consumer and his demand for a product. The demand for good increases when the income of the consumer increases because purchasing power of the consumer increases. Now he has more income to spend on different goods and services. (b) X and Y are substitute goods. A rise in the price of X result in a rightward shift of the demand curve of Y because substitute goods are those goods which satisfy the same type of need and hence can be used in place of one another to satisfy the given want. If price of good X rise, the consumer will shift his demand from X to Y good because they can be used in place of one another. |
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