Read the statement.
Economists note that personal income rose by 5 percent last year.
What impact will the change in personal income have on-demand?
A. It will cause the demand curve to shift down.
B. It will cause the demand curve to shift right.
C. It will cause the demand curve to shift up.
D. It will cause the demand curve to shift left.
To determine the impact of the change in personal income on demand, we need to understand the relationship between personal income and demand.
Typically, an increase in personal income leads to an increase in purchasing power, which can influence consumer behavior and demand for goods and services. When personal income rises, individuals have more money to spend, and this can lead to an increase in demand.
Based on this relationship, we can conclude that the change in personal income will cause the demand curve to shift. However, we need to determine the direction of the shift. To do this, we need to consider the options provided:
A. It will cause the demand curve to shift down: This implies a decrease in demand, which contradicts the understanding that an increase in personal income leads to an increase in demand. So this is an incorrect option.
B. It will cause the demand curve to shift right: This option suggests an increase in demand, which aligns with the understanding that a rise in personal income leads to increased purchasing power and higher demand. So this is a possible correct option.
C. It will cause the demand curve to shift up: This option does not accurately describe the direction of a demand curve shift. Demand curves typically shift left or right, not up or down. So this is an incorrect option.
D. It will cause the demand curve to shift left: This option implies a decrease in demand, which contradicts the understanding that an increase in personal income leads to an increase in demand. So this is an incorrect option.
Based on the analysis, the correct answer is B. It will cause the demand curve to shift right. An increase in personal income is likely to lead to higher demand for goods and services.