In Figure 3-4, the current position of the demand curve is D₁, and the price of a wireless earbud, which is a normal good, is $3. If there is an increase in consumer incomes, will the demand curve shift to D₂ or to D₃? What is the change in the amount of wireless earbuds demanded?

Figure 3-4

Transcribed Image Text:

FIGURE 3-4 Shifts in the Demand Curve If some factor other than price changes, we can show its effect by moving the entire demand curve, say, from D to D. We have assumed in our example that this move was precipitated by the government's giving digital devices that utilize wireless earbuds to every registered college student in the United States. Thus, at all prices, a larger number of wireless earbuds would be demanded than before. In contrast, curve D3 represents reduced demand compared to curve D, caused by a prohibition of digital devices that utilize wireless earbuds on campus. Price per Wireless Earbud ($) m 2 0 2 D3 8 D I 4 10 12 6 Quantity of Wireless Earbuds Demanded (millions of constant-quality units per year) 14 D