Question 15

The demand curve shifts left.

When there is an expectation of lower income in the future, consumers anticipate having less purchasing power, which leads to a decrease in demand for normal goods. As a result, the demand curve shifts to the left.

A) The demand curve shifts right.

This option is incorrect because a shift to the right would indicate an increase in demand. Lower income expectations would not motivate consumers to buy more of a normal good; rather, it would lead to reduced demand.

B) The demand curve shifts up.

This option is also incorrect. A shift upward typically indicates an increase in demand at all price levels, which contradicts the concept that lower future income would lead to a decrease in demand for normal goods.

C) The demand curve shifts down.

While this option suggests a decrease in demand, the term "shifts down" is not commonly used to describe demand curve movements. The correct terminology is a leftward shift, making this option misleading and incorrect.

D) The demand curve shifts left.

This is the correct option as it accurately reflects the economic principle that expectations of lower future income result in decreased demand for normal goods. Consumers are less likely to purchase these goods, leading to a leftward shift in the demand curve.

Conclusion

The correct answer is option D, as it clearly aligns with the economic theory surrounding consumer behavior and income expectations. The other options either misrepresent the effects of decreased income expectations on demand or use incorrect terminology, thus failing to accurately describe the situation.