Question

Assume that computers are a normal good. How will an increase in buyers’ incomes impact the market for computers? a) Demand for computers decreases and the P(e) and Q(e) both fall. b) Demand for computers increases and the P(e) and Q(e) both rise. c) Supply will increase and the P(e) and Q(e) both rise. d) Supply will decrease and the P(e) and Q(e) both fall. e) The market for computers is not impacted by buyers’ incomes.

Answer 1

Answer: Demand for computers increases and the P(e) and Q(e) both rise

This answer is correct because an increase in buyer incomes will shift the demand curve to the right, which means that now the equilibrium price and quantity both will increase. The reason for this is that now that people have higher income they are willing to pay a higher price for computers.

Explanation: