Exhibit 4.1

-Refer to Exhibit 4.1 for the demand curves of baby formula. Which of the following changes is likely to happen if the price of baby formula decreases?

Question

Exhibit 4.1
 
-Refer to Exhibit 4.1 for the demand curves of baby formula. Which of the following changes is likely to happen if the price of baby formula decreases?

Quizplus · Accepted Answer

When the price of baby formula decreases, there is an increase in quantity demanded, leading to a movement along the same demand curve from point a to point b. This is shown in Exhibit 4.1 where the quantity demanded increases from 20 to 30 (thousand cans per week) due to a decrease in price from $4.50 to $3.50 (per can) along the same demand curve D₁. A shift in the demand curve would occur if there were changes in consumer preferences, income levels, or other factors affecting demand, and would result in a new demand curve (either D₁ or D₂) at any given price level. Therefore, options A, C, D, and E are incorrect.

Exhibit 4.1 -Refer to Exhibit 4.1 for the Demand Curves of Baby