Explain the effect of the following changes on equilibrium price and quantity of a commodity:
(a)
increase in average incomes.
(b)
increase in population.

What will be an ideal response?


If average incomes rise, consumers will purchase more of most goods. That is, increases in income normally shift demand curves outward to the right. The equilibrium price and quantity both rise.  These are goods characterized as “normal goods.”
A larger population will presumably want to consume more of a commodity, even if the price of that commodity and average incomes do not change, thus shifting the entire demand curve to the right. The equilibrium price and quantity both rise.

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