Multiple Choice
If there is a change in a nonprice determinant of demand for a good, what happens to the demand curve?
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3. The Market Forces of Supply and Demand
Shifts in the Demand Curve
Multiple Choice
A change in consumer expectations about the future price of a good will:
A
shift the demand curve for the good to the left or right, depending on whether consumers expect prices to fall or rise
B
shift the supply curve for the good
C
have no effect on the demand curve
D
cause movement along the demand curve but not shift it
Verified step by step guidance1
Understand the difference between a movement along the demand curve and a shift of the demand curve. A movement along the demand curve occurs when the price of the good itself changes, while a shift in the demand curve happens when a non-price factor changes.
Identify consumer expectations about future prices as a non-price determinant of demand. Expectations about future prices can influence current demand because consumers may choose to buy more or less now based on what they expect to happen later.
Analyze how expectations affect demand: if consumers expect prices to rise in the future, they are likely to increase their current demand to avoid paying higher prices later, causing the demand curve to shift to the right.
Conversely, if consumers expect prices to fall in the future, they may delay their purchases, reducing current demand and causing the demand curve to shift to the left.
Conclude that changes in consumer expectations about future prices shift the demand curve either to the left or right, depending on whether prices are expected to fall or rise, rather than causing movement along the demand curve or affecting the supply curve.
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