Factors Affecting Demand

Answer to Try It

1.

• Customers' incomes have decreased.
  This is correct. Falling incomes would lead to a leftward shift of the demand curve causing less quantity demanded at any given price.
• The price of electric drills has increased.
  While this would explain the decrease in quantity demanded, it will not have occurred because of a shift in the demand curve, rather movement along the existing curve.
• Customers' incomes have increased.
  While his event would shift the demand curve, it would cause an increase in quantity demanded at any given price level. Jane Doe has observed a decrease.

2.

• essential
  Incorrect. Whether a good is 'essential' or not has no bearing on the evidence presented.
• normal
  Incorrect. we would expect to see demand increase as incomes rose if potatoes are a normal good.
• inferior
  Correct. An inverse relationship between demand and incomes is the hallmark of an inferior good.