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Chapter 3: Q. 3.17 (page 73)

In Fig 3-4, the current position of the demand curve is D1, and the price of a portable power bank, which is a normal good, is $3. If there is an increase in consumer incomes, will the demand curve shift to D2 or to D3? What is the change in the amount of portable power banks demanded?

Short Answer

Expert verified

D2

Increase of 4 units.

Step by step solution

01

Step1. Introduction

Income is one of the factors which leads to the shift of demand curve to either left or right.

02

Step2. Explanation 

Income has a direct relationship with the normal goods, so as the income rises, demand for normal goods rise too. As a result, the demand curve will shift from D1 to D2. The quantity demanded changes from 6 units to 10 units, i.e. an increase of 4 units.

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For each of the following shifts in the demand curve and associated price change of complement or substitute item, explain whether the price of the complement or substitute must have increased or decreased.

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