Question 30

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 the quantity demanded for normal goods. This results in a leftward shift of the demand curve.

A) The demand curve shifts left.

This option is correct because a decrease in expected future income causes consumers to reduce their current demand for normal goods, leading to a leftward shift in the demand curve. Normal goods are those whose demand decreases when consumer income decreases, making this shift a direct response to the anticipated change in income.

B) The demand curve shifts up.

This option is incorrect. An upward shift in the demand curve would suggest an increase in demand at every price level, which contradicts the scenario of expecting lower income. Lower income expectations typically do not motivate increased demand for normal goods.

C) The demand curve shifts right.

This option is also incorrect. A rightward shift in the demand curve implies an increase in demand, which is contrary to the behavior expected when consumers foresee a decline in income. Lower future income generally leads to decreased demand for normal goods.

D) The demand curve shifts down.

This option is incorrect as well. A downward shift of the demand curve is not a standard description of demand behavior; it does not accurately reflect the expected decrease in demand caused by lower future income. Instead, the demand curve shifts left to indicate reduced demand.

Conclusion

The leftward shift of the demand curve accurately represents the decrease in quantity demanded for normal goods in anticipation of lower future income. All other options fail to correctly depict the relationship between income expectations and demand, aligning with economic principles regarding consumer behavior towards normal goods.