Question

Shifters. Suppose the demand function for a good is ???? = 50??−0.75. Explain how demand changes under each of the following scenarios and provide an example of a new demand function that reflects this change: a) A popular celebrity endorses and promotes a product b) The number of consumers in the market falls c) A recession hits and consumer income falls (assuming ???? is an inferior good)

Answer 1

a) When a popular celebrity endorses and promotes a product , it will increase the demand for a good at each price level , so we can conlcude that the demand for a good will be double at each price level .QQdd = 2( 50pp - 0.75)

QQdd = 100pp - 1.5

b) When the number of consumers in the market falls, the demand for a good decreases at each price level .

c) A recession hits and consumer income falls, then the quantity demand increase since QQdd is an inferior good and for inferior good, the quantity demand increase when the income decrease or economic terms we can say that the income effect is negative for inferior goods. or negative relation with income. The demand curve get double.