Answer to Question #312805 in Macroeconomics for Huhii

Question

What happens to the demand curve of normal goods (draw an appropriate graph) in each of these cases?

a) The Bhutan population grows 0.5% in 2020?

b) An economy XYZ slides into recession in 2019, leading to a fall in real incomes

Answer 1

a)

This statistic shows the population change in Bhutan from 2010 to 2020. In 2010, Bhutan's population increased by approximately 1.11 percent compared to the previous years. Population growth is the result of the birth rate, low mortality rate and the immigration rate. The example of the year 2010 in the graph: The population in Bhutan increased by about 0.5% inhabitants.

b)

A normal good is a commodity whose demand increases when people's incomes fail. In the economy XYZ, fall in real incomes due to the recession decreases the purchasing power (ability to purchase the good) which causes a decrease in demand. This is shown by the demand curve shifting inwardly to the left from D0 to D1.