Question

Hi! I just finished quiz for chapter 2. I made mistakes in q2, which is "the demand curve will not shift if.." I chose "the number of buyers increases" while the correct answer should be "the price of the product decreases by 20% ". However, I still cannot agree with it, because I think if the price goes down by 20%, would some other consumers who used to buy the substitute turn to consume this very product? and hence to shift the demand curve?

Answer 1

The demand curve will NEVER shift when PRICES are changing. The demand curve will shift only when there are other factors included, such as INCOME, TASTES, TRADITIONS, SUBSTITUTES etc.

When you change THE PRICE, the only thing that may occur for sure, is SLIDING through the demand curve.

Hope this helps.