Multiple Choice
Which of the following combinations would most likely cause the demand curve to shift from AD1 to AD3?
93
views
3. The Market Forces of Supply and Demand
Shifts in the Demand Curve
Multiple Choice
Which of the following will cause the demand curve for good x to shift to the right?
A
A decrease in the price of good x
B
An increase in consumer income, assuming good x is a normal good
C
A decrease in the population of buyers
D
An increase in the price of a complementary good
Verified step by step guidance1
Understand that a demand curve shifts when a non-price determinant of demand changes. Changes in the price of the good itself cause movements along the demand curve, not shifts.
Identify the non-price factors that can shift the demand curve: consumer income, prices of related goods (substitutes and complements), tastes and preferences, expectations, and the number of buyers.
Analyze the effect of an increase in consumer income on the demand for good x, assuming it is a normal good. For normal goods, an increase in income increases demand, shifting the demand curve to the right.
Consider the other options: a decrease in the price of good x causes a movement along the demand curve (not a shift), a decrease in population reduces demand and shifts the curve to the left, and an increase in the price of a complementary good reduces demand, shifting the curve to the left.
Conclude that only an increase in consumer income (for a normal good) causes the demand curve for good x to shift to the right.
Related Videos
Related Practice
