Suppose consumer income increases.If wine is a normal good, what will happen to the equilibrium price and producer surplus?
A)both the equilibrium price and the producer surplus will decrease
B)both the equilibrium price and the producer surplus will increase
C)the equilibrium price will decrease and the producer surplus will increase
D)the equilibrium price will increase and the producer surplus will decrease

Question

Quizplus · Accepted Answer

When consumer income increases, demand for a normal good like wine increases. This leads to a higher equilibrium price and an increase in producer surplus, as producers benefit from selling more at higher prices.

Suppose Consumer Income Increases