Suppose the supply curve for wool is given byQs=P, whereQsis the quantity offered for sale when the price isP. Also suppose the demand curve for wool is given byQd= 10 P+I, whereQdis the quantity of wool demanded when the price is P. The level of income isI. AssumeIis an exogenous variable. Suppose the level of income isI= 20. Suppose the supply and demand relationships are shown in a graph where the vertical axis measures the price, and the horizontal axis measures the quantity. The vertical intercept of the graph showing the demand relationship is (0,). The equilibrium price is P=. At a price P=18, the amount of excess supply isunits.

If the income rises from 20 to 24, the vertical intercept of the graph showing the demand relationship shift from (0,) to (,), and the change in income yields a change in the price of.