When incomes increase, then in the market for jewelry we expect: a) demand for jewelry to increase b) demand for jewelry to decrease c) supply of jewelry to increase d) supply of jewelry to decrease

Economics Dec 13, 2020

When incomes increase, then in the market for jewelry we expect:

a) demand for jewelry to increase

b) demand for jewelry to decrease

c) supply of jewelry to increase

d) supply of jewelry to decrease

Expert Solution

The answer to this question is:

a) demand for jewelry to increase

An increase in the income will cause the demand for jewelry to surge. On the graph below, this scenario is demonstrated by the rightward shift in the demand curve from D0 to D1. As a result, the equilibrium quantity increases from Q1 to Q2 and price from P1 to P2.

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