Question

In the article, the graph labeled "Gas Guzzling" shows how the quantity demanded of gasoline varies each year. The graph depicts the quantity demanded that occurs at each year's equilibrium price. Therefore, the best way to interpret the numbers on the y axis is to assume that they represent an equilibrium when both the quantity of gas demanded and the quantity of gas supplied are the same. At this equilibrium, the price is the one that occurs at the intersection of the demand and supply curves.
We can turn to the textbook to understand why there were fluctuations in the quantity of gasoline sold over time. In particular, the textbook mentions several factors that shift a demand curve, as well as several factors that shift a supply curve. When either of these curves shifts, there will be a new equilibrium price and a new equilibrium quantity in the market.
Consider the following factor and indicate whether it increases or decreases the equilibrium price of gasoline and the equilibrium quantity of gasoline sold. In this problem, assume that gasoline is a normal good.
When income increases, the
Choose one:
A. supply curve shifts to the left.
B. demand curve shifts to the left.
C. supply curve shifts to the right.
D. demand curve shifts to the right.
As a result,
Choose one:
A. price increases and quantity increases.
B. price decreases and quantity increases.
C. price increases and quantity decreases.
D. price decreases and quantity decreases

Answer 1

Answer:

The correct answers are the options D and A. The demand curve shifts to the right and the price increases and the quantity increases.  

Explanation:

To begin with, the income of the consumers is a variable that only affects the demand and therefore that, as the gasoline is a normal good, when the income of the consumers increase then the quanitity demanded of the product will increase as well due to the fact that now the people have more money to use and when this happens the demand curve shifts to the right causing that the in the new equilibrium the price is higher and the quantity is higher as well too.