(a) With the aid of relevant diagrams, distinguish between an increase in supply and an increase in quantity supplied.
(b) Explain how a decrease in income tax will affect the demand for a normal good and an inferior good.
(c) Explain how an increase in the supply of a substitute will affect the demand for a commodity.
(b) When income tax reduces, it indirectly increases the disposable income of the consumer, hence his purchasing pow- er increases. If the good is a normal good, its demand will increase. If the good is an inferior good, its demand will fall.
(c) If the supply of a substitute good increases, ceteris paribus, its price will fall. The substitute becomes more attractive to the buyers and so consumers will now purchase more of the substitute, hence, demand for the commodity or other good whose supply has not changed will fall.
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