Question

Use the graph to answer the question that follows.

A supply and demand graph. S line curves up and right from intersection of x and y axes. D1 line curves down and right and intersects S line. D2 lines runs parallel to the right of D1, also intersecting S line. Point P1, Q1 marks intersection of S and D1.

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The graph illustrates a change in the market for bicycles. Which statement could explain the graph?

The demand for bicycles decreased due to a shortage of suppliers. The market price and quantity increased.
The demand for bicycles decreased due to increased preference for skateboards. The market price and quantity decreased.
The demand for bicycles increased due to higher consumer incomes. The market price and quantity decreased.
The demand for bicycles increased due to news about the health benefits of exercise. The market price and quantity increased.

Answer 1

The correct statement that would explain the shifts illustrated in the graph is:

**The demand for bicycles increased due to news about the health benefits of exercise. The market price and quantity increased.**

This is consistent with the supply and demand model, where an increase in demand (as shown by the shift from D1 to D2) leads to a higher equilibrium price and quantity, evident from the new intersection point between the new demand curve (D2) and the supply curve (S).