With reference to the demand for a normal good, consider the following statements: 1. An increase in consumers' income leads to a rightward shift in the market demand curve. 2. An increase in the number of consumers leads to a rightward shift in the market demand curve. 3. A rightward shift in demand, with supply constant, leads to a decrease in equilibrium price. Which of the statements given above is/are correct?

With reference to the demand for a… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 2: Market Equilibrium

mcqeasy

With reference to the demand for a normal good, consider the following statements:

An increase in consumers' income leads to a rightward shift in the market demand curve.
An increase in the number of consumers leads to a rightward shift in the market demand curve.
A rightward shift in demand, with supply constant, leads to a decrease in equilibrium price.

Which of the statements given above is/are correct?

NCERT textbook question

From NCERT Introductory Microeconomics · Page 77

Options

A2 only
B2 and 3 only
C1, 2 and 3
D1 and 2 only

Did you get this right?

Solution

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.

Your note

More from Chapter 2: Market Equilibrium

In the context of market equilibrium, what happens when the market demand curve shifts rightward while the supply curve remains unchanged ?

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In a market with free entry and exit, if the demand curve shifts to the left: Statements: 1. Firms will enter the market to capture the lower price. 2. The market price will temporarily fall below the minimum average cost. 3. The supply will increase until the price returns to the minimum average cost. Which of the statements given above is/are correct?

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What is the primary consequence of a price ceiling accompanied by rationing?

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With reference to the supply of labour by an individual, consider the following statements: 1. An increase in wage rate always leads to an increase in the supply of labour hours by an individual. 2. At high wage rates, the income effect may dominate the substitution effect, leading to a decrease in labour supply. 3. The individual labour supply curve can be backward bending. Which of the statements given above is/are correct?

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In a perfectly competitive market, if the market price is above the equilibrium price, there will be:

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