How does income affect the Demand curve?

Demand is the amount a consumer is willing and able to purchase a good or services for at various prices at a given point in time. A rise in the incomes of households would mean they have more disposable income where if inflation rate remains constant the consumers will now be able to afford larger amounts of a good or service. Therefore, demand will experience a rightward shift. Similarly to when a decrease in income occurs the consumers will have less dispoable income and be able to afford less thus demand shifts leftward. However, depending on the type of good whether inferior, normal or veblen, where for inferior goods demand decreases as income rises due to consumers being a more able to consume substitutes of better qualtiy i.e car for bus service. on the other hand, normal goods, demand increases as income increases. furthermore for veblen goods, which are thought of as survival goods so despite income increasing or decreasing demand for the good will persists as consumers need these goods to survive. Therefore demand for this may not change if income decreases.

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Answered by Bola O. Economics tutor

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