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24 September, 07:29

The quantity demanded for cars monthly is shown in the table below:

Demand for Cars

Price (dollars) Quantity of Cars Demanded

(thousands of cars)

23,000 600

21,000 620

19,000 640

17,000 660

15,000 680

An increase in income increases the quantity demanded by 10% at every price, what is the new monthly quantity demanded for cars (in thousands of cars) ?

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  1. 24 September, 10:06
    0
    An income increase of will increase the monthly demand from 3200,000 to 3,520,000 cars per month.

    Explanation:

    An increase in income will increase the Q demanded by 10% at each price level. So the new quantity demanded is shown in the table below.

    Price Qold Qnew

    23000 600 660

    21000 620 682

    19000 640 704

    17000 660 726

    15000 680 748

    So by summing both columns we find out that the old quantity demanded was 3,200,000 and the new quantity demanded is 3,520,000.

    In the case of above example, the demand curve will simply shift upwards by 10%.
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