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CSEET · Economic and Business Environment · Basics of Demand and Supply and Forms of Market Competition

Which one of the following changes would cause the demand curve for a normal good such as branded wristwatches to shift to the right?

A rise in consumers' incomes. For a normal good, higher income increases demand at every price and shifts the demand curve rightward. Changes in the good's own price only cause movements along the curve, and expecting a lower future price would reduce current demand.

  1. AA rise in consumers' incomesCorrect
  2. BA fall in the price of the watch itself
  3. CA rise in the price of the watch itself
  4. DAn expected fall in the watch's price next month

Explanation

For a normal good, higher income raises demand at every price, shifting the curve rightward. Own-price changes cause movements along the curve, not shifts. An expected future price fall makes buyers postpone purchases, shifting demand left, so that option is wrong.

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