Suppose the demand for fabric softener can be described as Q^D = 1,000 - P +0.01I, where Q^D is the quantity of fabric softener demanded, P is the price of fabric softener, and I is income. Suppose that income is initially 1,000, but it falls to 800. The new equation for the demand for fabric softener is: A) 800 - P + 0.01I, and demand has shifted to the left. B) 800 - P + 0.01I, and demand has shifted to the right. C) 1,080 - P, and demand has shifted to the left. D) 1,080 - P, and demand has shifted to the right.

Question

Quizplus · Accepted Answer

The initial demand equation is Q^D = 1,000 - P + 0.01(1,000) = 1,010 - P. When income falls to 800, the equation becomes Q^D = 1,000 - P + 0.01(800) = 1,080 - P. This indicates a leftward shift in demand due to the decrease in income.

Suppose the Demand for Fabric Softener Can Be Described as QD

Suppose the Demand for Fabric Softener Can Be Described as Q^D