Economics – The allocation of resources - Demand | e-Consult

Answer: The demand diagram shows an inverse relationship between price and quantity demanded. An increase in consumer income is likely to shift the demand curve to the right. This is because consumers have more disposable income and are therefore willing and able to purchase more apples at each price level.

As a result of this rightward shift, the new equilibrium point will be at a higher price and a higher quantity. The equilibrium price will increase and the equilibrium quantity demanded will also increase. This is illustrated by the new equilibrium point (E2) on the diagram, which lies above and to the right of the original equilibrium point (E1).

• Price: Increases from P1 to P2
• Quantity: Increases from Q1 to Q2