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CA Foundation · Business Economics · Theory of Demand and Supply

Rahul's demand for a branded phone is given by Q = 100 − 2P at the current income. When his income rises, the demand becomes Q = 120 − 2P. At a price of ₹30, what is the change in quantity demanded, and how is it classified?

Quantity demanded rises from 40 to 60 units at ₹30 and this is a rightward shift of the demand curve. The price is constant, so the increase comes from higher income, a non-price determinant, which moves the whole curve and not the point on it.

  1. ARises from 40 to 60 units, a rightward shift of the demand curveCorrect
  2. BRises from 40 to 60 units, a movement along the demand curve
  3. CFalls from 60 to 40 units, a leftward shift of the demand curve
  4. DRises from 40 to 50 units, a rightward shift of the demand curve

Explanation

At P = 30, the old demand is 100 − 60 = 40 units. The new demand is 120 − 60 = 60 units. The price is unchanged and the quantity rises because of an income increase, so the curve itself shifts rightward. It is not a movement along the curve.

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