Incomes and Restaurant Meals
The question
Assume the market for restaurant meals in the country of Beloria is initially in equilibrium. Household incomes in Beloria rise, and restaurant meals are a normal good. Show the effect of this change on the market for restaurant meals, assuming all else is held constant. Show the effect on the Supply and Demand graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Incomes and Restaurant Meals: the worked answer
On the Supply and Demand graph, Demand shifts right.
Why Demand shifts right
Restaurant meals are a normal good, so when household incomes rise, consumers are willing and able to purchase more meals at every price. Income is a determinant of demand, so the demand curve shifts to the right. Producers' costs and technology are unchanged, so the supply curve does not move.
What happens to the equilibrium
The equilibrium price of restaurant meals rises and the equilibrium quantity increases.
The mistake students make on this one
Many students shift supply right as well, because more meals end up being served after the change. That extra output is an increase in quantity supplied along an unchanged supply curve, pulled out by the higher price; nothing happened to restaurants' costs, technology, or number.
On exam day
When only buyers' circumstances change, move exactly one curve and let the other side of the market slide along its own curve; label the new curve D2 and mark the new P and Q with arrows.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Demand shifts right and every other curve on the Supply and Demand graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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