explain with the help of diagram effect of following demands for a good
rise in income of its buyer
fall in income of its buyer
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(i) Demand for a commodity will decrease when there is a fail in the price of substitute goods. Implying that demand curve would shift backward: less will be purchased at the same price. Demand for commodity falls from PK to PK1. (a) illustrates this situation.
(ii) Demand for a commodity will decrease also when there is a fall in income of the consumer (assuming that the commodity demanded is a normal good). This would imply a backward shift in demand curve: less goods will be purchased at the same price. Demand for a commodity falls from PK to PK1. (b) illustrates this situation.
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