AP Macroeconomics Question 321: Answer and Explanation
Use your browser's back button to return to your test results.
4. Suppose DVD players are a normal good and are exchanged in a competitive market. All else equal, an increase in household income will
- A. increase the equilibrium quantity and increase the price.
- B. decrease the equilibrium quantity and increase the price.
- C. increase the equilibrium price, but the change in quantity is ambiguous.
- D. decrease the equilibrium quantity and decrease the price.
- E. increase the equilibrium quantity but the change in price is ambiguous.
Correct Answer: A
A-If DVDs are normal goods, an increase in household income increases demand for DVDs, which increases quantity and price. Even though this is a macroeconomics exam, be prepared for simple supply and demand questions to test your understanding of markets.