3 The effects of an increase in income: demand equation: P Q=D(P,Y) Price of cars An increase in income increases the quantity of cars consumers demand at each price. D D .which increases Q Quantity the equilibrium price of cars and quantity. CHAPTER1 The Science of Macroeconomics slide 20CHAPTER 1 The Science of Macroeconomics slide 20 The effects of an increase in income: D2 Q Quantity of cars P Price of cars S D1 Q1 P1 An increase in income increases the quantity of cars consumers demand at each price. .which increases the equilibrium price and quantity. P2 Q2 demand equation: ( , ) = d Q D P Y 3