Consider the following statements, each for a market with a fixed number of firms:
(A) A rise in consumers’ income shifts the demand curve for a normal good to the right.
(B) A rise in consumers’ income shifts the demand curve for an inferior good to the right.
(C) An increase in the number of consumers shifts the supply curve to the right.
(D) An increase in the number of firms shifts the supply curve to the right.
(E) A rise in the price of an input leaves the demand curve unchanged.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (D) and (E) only
A change on the buyers’ side shifts the demand curve. A change in costs or in the number of firms shifts the supply curve.
(A) A rise in consumers’ income shifts the demand curve for a normal good to the right. — Correct. For a normal good, more income means more demand at each price.
(B) A rise in consumers’ income shifts the demand curve for an inferior good to the right. — Incorrect. Consumers spend less on an inferior good when income rises, so its demand curve shifts left.
(C) An increase in the number of consumers shifts the supply curve to the right. — Incorrect. More consumers shift the demand curve to the right. The supply curve depends on the firms, so it does not move.
(D) An increase in the number of firms shifts the supply curve to the right. — Correct. With more firms, more is supplied at each price.
(E) A rise in the price of an input leaves the demand curve unchanged. — Correct. Input prices affect firms’ costs, not what consumers want to buy, so the demand curve stays put.
NCERT (2026-27): “Demand Shift … Suppose due to a hike in the salaries of the consumers, their incomes increase. … With an increase in income, consumers are able to spend more money on some goods. But recall from Chapter 2 that the consumers will spend less on an inferior good with increase in income whereas for a normal good, with prices of all commodities and tastes and preferences of the consumers held constant, we would expect the demand for the good to increase at each price as a result of which the market demand curve will shift rightward.” “Demand Shift … Suppose due to some reason, there is increase in the number of consumers in the market for clothes. As the number of consumers increases, other factors remaining unchanged, at each price, more clothes will be demanded. Thus, the demand curve will shift rightwards. But this increase in the number of consumers does not have any impact on the supply curve since the supply curve may shift only due to changes in the parameters relating to firms’ behaviour or with an increase in the number of firms, as stated in Chapter 4.” “Supply Shift … Let us consider a situation where all other things remaining constant, there is an increase in the price of an input used in the production of a commodity. This will increase the marginal cost of production of the firms using this input. Therefore, at each price, the market supply will be less than before. Hence, the supply curve shifts leftward. In the Figure 5.3(a), this is shown by a shift in the supply curve from SS0 to SS2. But this increase in input price has no impact on the demand of the consumers since it does not depend on the input prices directly. Therefore, the demand curve remains unchanged. … Let us discuss the impact of an increase in the number of firms. Since at each price now more firms will supply the commodity, the supply curve shifts to the right but it does not have any effect on the demand curve. …” |