Question 1

Increase in income and its effects of inferior goods.

Supply curve

When the income of a consumer goes up, the supply curve of inferior goods shifts inwards. This is because less of the good is produced to meet the reduction in demand.

Demand curve

When income increases, the consumer can afford more expensive goods. This will cause him to buy less of the inferior good. The demand curve will hence shift backwards indicating a decrease in demand.


In order to counter the fall in demand, producers might opt to lower the price of the inferior good in order to attract other people of lower means. This will drive up the demand.


The quantity of the product will be lower. This applies to both the quantity produced and sold.

Question 2

Complementary goods

Supply curve

When the price of slidgets goes up, the supply curve of widgets will shits inwards indicating a decrease in supply.

Demand curve

The demand curve of widgets will also shift inwards. This is because demand of the product will go down when the price of the complementary good rises.


The price of the widgets will rise following an increase in the price of the complementary good.


Quantity demanded of the widget will go down. This will be as a result of the increase in price.

Question 3

Consumer choice model

A positive change in taste will increase demand for the good, causing the demand curve to shift outwards. The opposite will happen if the change in negative. The shift in the demand curve will be horizontal, without affecting the price.

Question 4

A decrease in price of one commodity will mean that the consumer can buy more of that commodity. The consumer does not need to change his quantity of the other product. He may alter his budget to increase the amount of goods purchased due to increase in disposable income.

Question 5

Change in amount demanded

This is the amount of a commodity that a consumer purchases at any given point, whether the market is at equilibrium or otherwise.

Change in demand

This is the change in the quantity of goods that a consumer purchases, due to various factors such as price or preference of the consumer.

Change in amount supplied

This is a variation in the amount of a good that suppliers inject into the market. It could indicate a positive or negative movement.

Decrease in supply

This is a negative movement of the amount of goods that suppliers bring into the market.

Increase in supply

This is a positive shift in the amount of goods that are brought into the market. This is caused by factors that cause customers to demand more of the good than before.

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