1. Home
  2. Education
  3. Economics

Supply & Demand Practice Question

By Mike Moffatt, About.com

4 of 7

Supply & Demand Practice Question - Part B

Supply & Demand Image 3

Supply & Demand - Part B

Illustrate each of the following events using a demand and supply diagram for bananas:

Consumers' income drop.

For most goods (known as "normal goods"), when people have less money to spend, they buy less of that good. Since consumers now have less money they're likely to buy less bananas. Thus the demand curve must shift down, as shown by the green line. Note that our equilibrium price is lower along with our equilibrium quantity. Our new equilibrium price is denoted by p*' and our new equilibrium quantity is denoted by q'*.

Explore Economics

About.com Special Features

A Smarter Future

Tips that will help finance your education, excel in the classroom, and advance your career. More >

How to Ace the GRE

Being well prepared is the first step; here are more essential suggestions. More >

  1. Home
  2. Education
  3. Economics
  4. Macro, Micro, Other Fields
  5. Microeconomics
  6. Supply and Demand
  7. Demand
  8. Supply & Demand Practice Question

©2009 About.com, a part of The New York Times Company.

All rights reserved.