Question

4. Movements along versus shifts of demand curves 

Consider the market demand for cereal. 

Complete the following table by indicating whether an event will cause a movement along the demand curve for cereal or a shift of the demand curve for cereal, holding all else constant.

Event	Movement Along	Shift
An increase in the price of cereal
A change in tastes of consumers that makes them desire more cereal
A change in the expectations of consumers about their future income

  

Answer 1

event	movement along	shift
an increase in the price of cereal	yes
a change in tastes of consumers that makes them desire more cereal		yes
a change in the expectations of consumers about their future income		yes

working:

An increase in price of cereal all other things remaining constant will only see a movement along the same demand curve.

A change in tastes of consumers that makes them desire more cereal will cause a shift in demand curve, since for a given price the demand for cereals will increase.

A change in expectations of consumers about their future income will increase or decrease the quantity demanded at every given price point, so this will cause a shift in demand curve.

Answer 2

1. shift 2. shift 3. movement