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Indicate if the following items are an event that will cause a movement along the demand curve for hot dogs of shift of the demand curve for hot dogs, holding all else constant

Economics Dec 13, 2020

Indicate if the following items are an event that will cause a movement along the demand curve for hot dogs of shift of the demand curve for hot dogs, holding all else constant.

a) A decrease in the price of salted pretzels (a substitute for hot dogs).

b) A decrease in the price of hot dogs.

c) A decrease in income of consumers.

Expert Solution

a) A decrease in the price of salted pretzels (a substitute for hot dogs).

This event will cause a shift in the demand curve for hot dogs because it is a nonprice factor. Since the price of salted pretzels is declining, the change in the demand curve for hot dogs will be a leftward shift.

b) A decrease in the price of hot dogs.

This event will cause a movement along the demand curve for hot dogs since it involves a change in the price, that is, it is a price factor. Moreover, this event will cause the quantity demanded of hot dogs to surge.

c) A decrease in income of consumers.

This event will cause a shift in the demand curve for hot dogs because it is a nonprice factor. Since the income of households is declining, there will be a leftward shift in the demand curve for hot dogs.

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