Question

Suppose that consumers' incomes increased, such that more video games were demanded at each price level. After the increase in demand, the new equilibrium price is _____, where both supply and demand equal _____.

Answer 1

Answer:

After the increase in demand, the new equilibrium price is $160, where both supply and demand equal 300.

Explanation:

When the income level of customers increases, the demand curve shifts to the right, increasing the quantity demanded at every price level.

If the quantity demanded for a good increases as its customers' income increases, it is called a normal good.

In this case, the previous equilibrium quantity was 200 units and the equilibrium price was $50. Since the demand curve shifted to the right, both the quantity demanded increased from 200 units to 300, and the equilibrium price increased from $50 to $160.