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Assuming other things equal, which one of the following changes could cause a leftward shift in the demand curve for good C? A

Economics Dec 13, 2020

Assuming other things equal, which one of the following changes could cause a leftward shift in the demand curve for good C?

A. an increase in money income if C is a normal good.

B. population growth that causes an expansion in the number of persons consuming C.

C. a decrease in the price of complementary product B.

D. an increase in money income if C is an inferior good.

Expert Solution

(Ans.)_ Option D

The correct answer is option d.

When the income of an individual increases and good is an inferior good then the demand for that particular good decreases as there is a negative relationship between an inferior good and money income.

Inferior goods are basically those goods which a person consumes just because of low income.

As his income increases, he shifts towards the consumption of good quality goods and reduces his consumption of low quality goods.

The rest of the options are not correct in following manner:

If a good is a normal good and money income increases then the demand of that particular good increases as there is a positive relationship between the money income and normal goods.

High population growth also cannot shift the demand curve as the demand is not affected by it, rather, it might affect the supply curve of a good.

When the price of the complementary good decreases, the demand for good C would rather increase as complementary goods are those goods which are used together. For example, bread and butter.

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