Effect of an increase in Income on Price and Quantity

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Effect of an increase in Income on Price and Quantity. The principal non-Price determinants of Demand are: Income Price of substitutes Price of complements Tastes and Preferences Others include Population Expected future prices Consumer confidence - PowerPoint PPT Presentation

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Effect of an increase in Income on Price and Quantity

• The principal non-Price determinants of Demand are:– Income– Price of substitutes– Price of complements– Tastes and Preferences

• Others include– Population– Expected future prices– Consumer confidence

• We look at the effect of an increase in Income on equilibrium Price and Quantity for a Normal good.

S

D0

Price

0Quantity

Q0

P0

Initial Equilibrium

S

D0

D1

Price

0Quantity

Q0 Q1

P0

P1

Final Equilibrium

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