The correct option is 1 and 2 only.
Explanation
Market demand represents the total quantity of a good demanded by all consumers at various price levels. A "normal good" is defined as a good for which demand increases when consumer income rises, distinguishing it from inferior goods.
Statement 1 is Correct: For a normal good, there is a direct, positive relationship between consumer income and demand. When income increases, consumers possess higher purchasing power and are willing to buy more of the good at any given price. This increase in demand is graphically represented as a rightward shift of the demand curve.
Statement 2 is Correct: The market demand curve is derived by the horizontal summation of individual demand curves. An increase in the number of consumers expands the total market size, leading to a higher aggregate quantity demanded at every price level. Consequently, the market demand curve shifts to the right.
Statement 3 is Incorrect: A rightward shift in the demand curve signifies an increase in demand. If the supply curve remains constant, this increase creates excess demand (shortage) at the initial equilibrium price. Market forces will push the price upward to clear the market. Thus, a rightward shift in demand leads to an increase in the equilibrium price, not a decrease.
Key Takeaway: Factors such as rising income (for normal goods) and population growth cause the demand curve to shift rightward. Under ceteris paribus conditions (constant supply), an increase in demand results in a higher equilibrium price and quantity.