Question

Leading economic indicators suggest that incomes will be going up next year. In response to these reports, companies are forecasting increased prices for future sales of their goods. As a result of these increases, the supply curve will:____________

Answer 1

Answer:

shift to the left, causing the equilibrium price to increase.

Explanation:

As a result of the forecast predicting increase income companies will reduce supply to take advantage of the increased income.

When income increases people will be more able to buy goods at higher prices. So prices that were formerly considered expensive will now become normal (increase in equilibrium price).

This is illustrated in the attached diagram.