Question

The demand curve for Widgets is given by QD = 125 + 1.5y - 25p + 30pG, where QD is the quantity of widgets demanded, y is the per capita income and pG is the price of Gizmos. An increase in the price of Widget itself will cause Group of answer choices:

movement along the demand curve.

demand increases.

demand shifts right.

demand shifts left.

Answer 1

Since the law of demand stats that there is an opposite relationship between price and quantity demanded and other factors which affect the demand remains same.

The demand determinant are;

Its own price, price of substitute goods, price of complementary goods, income of the consumer and taste and preferences of the consumers.

The change in the quantity demand arises when price of the goods changes and there will be change in the demand when factors other than price changes.

In case of change in the quantity demand, there will be movement along the demand curve and in case of change in the demand, there will be shift of the demand curve.

As the demand curve for Widgets is given by QD = 125 + 1.5y - 25p + 30pG, where QD is the quantity of widgets demanded, y is the per capita income and pG is the price of Gizmos.

Therefore with an increase in the price of Widget itself will leads to upward movement along the demand curve of widgets.

Hence option first is the correct answer.