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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 6, Problem 5DQ
Textbook Problem
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Name some events that will cause a demand curve to shift.

To determine

The factors that lead to a shift in the demand curve.

Explanation of Solution

The change in income, change in consumer's taste for commodity, and price of relative goods (substitutes or compliment) are the factors that lead to a shift in the demand curve.

  1. Change in the income of the consumer: When the income of a consumer rises, a consumer has more money to spend. Thus, any rational consumer would like to consume more goods when his/ her income rises.
  2. In this case, the demand curve will shift rightwards. Fall in income will shift the curve leftwards.

    Generally, with an increase in income, the demand for some goods like smartphones, laptops, and home accessories increases.

    Sometimes this may not be true in case of inferior goods like a secondhand car and rented house. Such goods whose quantity demanded falls on the rise in income are called inferior goods. When income rises, the consumer would like to switch in their own house.

  3. Taste of consumer: When the consumer's taste for commodity changes, the demand curve shift either right or left...

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