Multiple Choice
Which of the following factors increases the volatility in demand in industrial markets?
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4. Elasticity
Determinants of Price Elasticity of Demand
Multiple Choice
Which of the following is a determinant of demand that would cause the demand for a good to increase?
A
An increase in consumer income (for a normal good)
B
A decrease in the population size
C
A decrease in the price of a substitute good
D
A decrease in the price of the good itself
Verified step by step guidance1
Step 1: Understand the concept of demand determinants. Demand for a good is influenced by factors such as consumer income, prices of related goods (substitutes and complements), population size, consumer preferences, and expectations.
Step 2: Identify how an increase in consumer income affects demand. For a normal good, an increase in income typically leads to an increase in demand because consumers can afford to buy more.
Step 3: Analyze the effect of a decrease in population size. A smaller population usually means fewer consumers, which tends to decrease demand for most goods.
Step 4: Consider the impact of a decrease in the price of a substitute good. If a substitute becomes cheaper, consumers may switch to that substitute, causing the demand for the original good to decrease.
Step 5: Recognize that a decrease in the price of the good itself does not shift the demand curve but causes a movement along the demand curve (change in quantity demanded), so it is not a determinant that increases demand.
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