Economics 9708 · AS & A Level · Income elasticity of demand

Income elasticity of demand — practice question

D1 and S1 are the original demand and supply curves in the market for new cars, with equilibrium at X. What would lead the demand curve to move to D2 and the supply curve to move to S2?

  • Aa decrease in real incomes and a rise in the costs of new car production
  • Ba decrease in the price of petrol and a subsidy on new car production
  • Can increase in the availability of loans for new car purchases and a specific tax on new cars
  • Dan increase in the price of train travel and an increase in the number of car producers

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