Question

Consider the demand for avocados. Does an increase in average income cause a shift of the demand curve for avocados or a movement along the demand curve? Explain briefly An increase in average income causes


A. a shift of the avocado demand curve because only a change in the price of avocados causes a movement along the avocado demand curve.

B. a movement along the demand curve for avocados but a shift in the supply curve for avocados.

C. a shift of the avocado demand curve because consumers will not spend any of the new income

D. a shift of the avocado demand curve because all factors including the price of avocados cause quantity to change for a given price.

Answer 1

Answer:

A. a shift of the avocado demand curve because only a change in the price of avocados causes a movement along the avocado demand curve.

Explanation:

Since consumer income increased, the whole demand curve will shift to the rights. This means that consumers will be willing to purchase more avocados at every price level. A movement along the demand curve results from a change in the price of avocados, which changes the quantity demanded, not the demand curve.