An increase in income will most likely:

• A. Reduce the demand for normal goods
• B. Decrease consumer surplus for all goods
• C. Have no effect on willingness to pay for any good
• D. Increase consumer surplus for normal goods

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the definition of normal goods. Normal goods are those for which demand increases as consumer income rises. This means that when income goes up, consumers are willing to buy more of these goods at any given price.
2. Step 2: Recall the concept of consumer surplus. Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. It measures the net benefit to consumers from purchasing a good.
3. Step 3: Analyze the effect of an increase in income on demand for normal goods. Since demand increases, the demand curve shifts to the right, indicating a higher willingness to pay at each quantity.
4. Step 4: Connect the increase in demand to consumer surplus. With a higher willingness to pay and the same market price, the area representing consumer surplus increases, meaning consumers gain more net benefit.
5. Step 5: Conclude that an increase in income will most likely increase consumer surplus for normal goods, as consumers can afford and are willing to pay more, enhancing their overall satisfaction.