(Figure: Demand Shift) Which of the following factors wouldcause the change in the figure?
Figure: Demand Shift I. an increase in the price of a complement goodII. an increase in production costsIII. an increase in the price of a substitute goodIV. an increase in income for an inferior good

Question

(Figure: Demand Shift) Which of the following factors wouldcause the change in the figure?
Figure: Demand Shift  I. an increase in the price of a complement goodII. an increase in production costsIII. an increase in the price of a substitute goodIV. an increase in income for an inferior good

Quizplus · Accepted Answer

Only a change in the price of a substitute good, as described in option III, would cause a shift in demand. An increase in the price of a complement good, as in option I, would cause a decrease in demand for that good but would not shift the entire demand curve. Similarly, an increase in production costs, as in option II, would affect supply rather than demand. Finally, an increase in income for an inferior good, as in option IV, would cause a shift in demand but in the opposite direction to that shown in the figure (i.e., demand would decrease).

(Figure: Demand Shift) Which of the Following Factors Wouldcause the Change