Question:
Change in market equilibrium quantity from point A to point B [downward along the demand curve] would most likely be caused by
(1) an increase in the price of a substitute product.
(2) an increase in consumers’ income.
(3) a decrease in consumers’ income.
(4) a decrease in the cost of production of good X.
(5) a decrease in the supply of good X.
Correct Answer:
(4)
Answer Explanation:
A downward movement along the existing demand curve signifies an increase in “quantity demanded” caused solely by a drop in the product’s own price. This price drop in the market would be triggered by a rightward shift in the supply curve, which is caused by a “decrease in the cost of production.”
Topic: Demand Theory Year: 2019
Leave a Reply