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 movement along the demand curve or to a shift in the demand curve? Explain your answers.

Answer 1

A change in consumers' tastes leads them to buy a different quantity (more or less depending on whether the change is favorable to the product in question or unfavorable) for each price level. This is reflected by way of a shift in demand curve (shift to the right if favorable / increase, to the left if unfavorable / decrease).

A change in price leads to a movement along the demand curve. This is the basic law of demand that there's an inverse relation between price and quantity demanded.