Real Estate Council of Alberta Fundamentals Practice Exam

Which factor can lead to a decrease in demand for a good or service?

1. Increase in the population

2. Decrease in consumer income

3. Enhanced product marketing

4. Improved product quality

The correct answer is: Decrease in consumer income

A decrease in consumer income can lead to a decrease in demand for goods or services because when individuals have less disposable income, they tend to cut back on their spending. This reduction in income affects their purchasing power, causing them to prioritize essential items and forgo or reduce spending on non-essential goods and services. In the context of real estate, for instance, if potential buyers experience a decrease in their income, they may be less likely to purchase a new home or may opt for less expensive housing options. In contrast, factors such as an increase in population, enhanced product marketing, and improved product quality typically work to drive demand upward, as they make products or services more desirable or accessible to consumers.