Question: Does a change in consumers’ tastes lead to a movement along the demand curve or...

Question: Does a change in consumers’ tastes lead to a movement along the demand curve or to a shift in the demand curve? Does a change in price lead to a movement along the demand curve or to a shift in the demand curve? Explain your answers.

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Expert Solution

It shall be noted that as per the law of demand, there is an inverse relationship between the quantity demanded and the price per unit, ceteris paribus, and this inverse relationship can be represented by a downward-sloping demand curve.

This means the factors that affect demand other than the price of the good itself such as consumer tastes & preferences, the income level of the consumers, prices of other related goods, availability of close substitutes, expectations of price change in the future are assumed to be constant for the movement along the given demand curve.

Thus, this implies, that if there happen to be any change factors (excluding the change in the price of the good itself), there would be a rightward or leftward shift in the demand curve.

Thus, when there is a change in consumers’ tastes, there is a shift in the demand curve - that is a leftward or rightward shift in the demand curve.

When there is a change in the price of the good itself, there is a movement along the demand curve.

Rahul Sunny answered 1 year ago

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