Multiple Choice
In the market for coffee, holding price and all other determinants of demand constant, how does an increase in the number of consumers affect the demand curve?
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3. The Market Forces of Supply and Demand
Shifts in the Demand Curve
Multiple Choice
Which of the following strategies would reduce the demand for new lumber (i.e., shift the demand curve for new lumber to the left)?
A
Provide subsidies to builders for purchasing recycled or reclaimed wood as an alternative to new lumber
B
Increase consumer incomes in housing markets where wood-framed construction is common, assuming new lumber is a normal good
C
Reduce the price of new lumber through a per-unit subsidy to lumber producers
D
Increase the price of steel and other close substitutes for new lumber in construction
Verified step by step guidance1
Understand that a leftward shift in the demand curve means a decrease in demand at every price level, not just a movement along the curve due to price changes.
Analyze each option to see if it would cause consumers or builders to want less new lumber at every price, which would shift demand left.
Recognize that providing subsidies to builders for purchasing recycled or reclaimed wood makes these alternatives cheaper and more attractive, reducing demand for new lumber and shifting its demand curve left.
Note that increasing consumer incomes (assuming new lumber is a normal good) would increase demand, shifting the demand curve right, not left.
Understand that reducing the price of new lumber affects quantity demanded (movement along the demand curve), not the demand curve itself, and increasing the price of substitutes would increase demand for new lumber, shifting demand right.
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