Question

Consumers' incomes decrease, which causes a decrease in demand. This causes the equilibrium price to _____. increase decrease stay the same

Answer 1

Answer:

The decrease in income of the consumer leads to decrease in the equilibrium price in order to increase the demand in the market. When the the consumer is not able to purchase commodities due to decrease in income the demand for the goods fall and the supply is stable.

But with decreased demand the supply increases. To stabilise the situation the equilibrium price needs to be decreased so the consumer demand increases to match the supply in the market.