Question

True or False: A “change in quantity demanded” is a shift of the entire demand curve to the right or to the left.

Short answer

The statement “change in quantity demanded is a shift of the entire demand curve to the right or the left” is false.

Step-by-step solution

Concept of demand

Demand refers to the amount of a good that a consumer is willing and able to buy, given the price and income of the consumer.

The demand for a good can change because of the following reasons:

• A change in demand for a good due to a change in its price is known as a change in quantity demanded. For example, if the quantity demanded for ice cream increases from 20 units to 40 units when the price falls from $10 to $5, this is a change in the quantity demanded.

• A change in demand for a good due to a change in factors other than its price is known as a change in demand. For example, if the demand for a good increases from 4 units to 10 units at a price of $6, there is a change in demand.

Effect of change in quantity demanded on the demand curve

A change in quantity demanded means that the consumers demand different units of a good with the change in the price level. For example, when the price of a packet of chocolate is $1, the quantity demanded is 10 chocolates. If the price changes to $1.5, the quantity demanded falls to 7 chocolates.

Thus, these changes are shown by upward and downward movement along the demand curve, showing the relation between price and quantity of a good. An upward movement means contraction of demand due to higher prices, and a downward movement means expansion of demand due to lower prices.

Shifts in the demand curve

The change in demand happens when factors like income, related goods’ price, taste and preferences, or expectations of consumers change with time. The price of the good remains the same, but these determinants change that influence the demand behavior of consumers. These changes shift the demand curve.

For example, if the income of the consumer increases from $2000 to $4000, the consumer will increase the demand for normal goods. This shifts the demand curve forward, increasing the demand at each price.

Similarly, if a consumer expects that the price of a dress will fall from $10 to $5 in the future, he/she will reduce the current demand to buy the dress in the future. This will shift the demand curve backward.