Question

Due to substantial increases in prices in Country A, the real income level of the population in Country A decreases. Show on a diagram how the decrease in the income level in Country A will affect the demand for meat, which is a normal good.

Answer 1

Decrease in the level of income causes a shift in the demand curve inwards reducing the quantity demanded of meat and which produces

a new equilibrium at a lower price of the meat. This can be explained in the below diagram.