Help me with this, please.
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?
It will cause the demand curve to shift down.
It will cause the demand curve to shift right.
It will cause the demand curve to shift up.***
It will cause the demand curve to shift left.
To determine the impact of the change in personal income on demand, let's first understand how personal income influences demand.
Personal income refers to the amount of money individuals receive through various sources, such as wages, salaries, and investments. When personal income increases, individuals generally have more disposable income, which is the money left after paying for taxes and necessary expenses. This increase in disposable income often leads to a change in consumer behavior and subsequently affects demand.
Now, let's consider the options provided:
- "It will cause the demand curve to shift down." This option suggests that an increase in personal income would lead to a decrease in demand. However, this doesn't align with typical economic theory since higher income usually results in higher spending and, thus, an increase in demand.
- "It will cause the demand curve to shift right." This option indicates that an increase in personal income would cause the demand curve to shift to the right. This option aligns with the general understanding that higher income leads to higher demand, as individuals have more purchasing power.
- "It will cause the demand curve to shift up." This option suggests that an increase in personal income would cause the demand curve to shift upward. This option correctly conveys that higher personal income typically leads to increased demand.
- "It will cause the demand curve to shift left." This option implies that an increase in personal income would lead to a decrease in demand. However, as mentioned before, higher income generally results in higher spending and, thus, an increase in demand.
Given the information, the correct answer is, "It will cause the demand curve to shift up." An increase in personal income is likely to lead to an upward shift in the demand curve.