Demand Shift Explains Equilibrium Change

Steps:

• Identify shift: Equilibrium from X to Y shows higher price and quantity, indicating rightward demand curve shift.
• Rule out supply shift: Rightward supply would lower price while raising quantity, but price rose.
• Evaluate options: Check each against demand increase causes and effects.
• Select incorrect: Option misattributes cause to supply subsidy.

Why C is correct:

• Subsidies shift supply right, decreasing price per law of supply; here price increased, so subsidy cannot explain rise in quantity supplied.

Why the others are wrong:

• A: Income rise for normal good shifts demand right, raising price and quantity.
• B: Higher equilibrium price moves up supply curve, increasing quantity supplied.
• D: Substitute F's price rise shifts E's demand right, increasing E's price and quantity.

Final answer: C