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

Answer 1

• Change in consumer's tastes lead to a shift in the demand curve.
• This is because when the consumer's taste for any good or service increases, they will demand more of that good. This will cause the demand to increase and hence the demand curve will shift to the right.
• Change in the price of any good or service will lead to a movement along the demand curve.
• We know that price is observed on the vertical portion of a demand graph. When the price increases or decreases we usually observe a downward movement or an upward movement along the demand curve.