Factors Affecting Demand

The Effect of Income on Demand

Answer to Try It


    • 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.


    • 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.