Match each economic event affecting the market for palm oil on the left with its corresponding geometric effect on the palm oil demand curve on the right.
- A sharp increase in the retail price of groundnut oil (a substitute for palm oil)Rightward shift of the demand curve caused by a price rise of a substitute
- A drop in the market selling price of palm oil itselfDownward movement along the demand curve indicating an increase in quantity demanded
- A widely published health report discouraging consumption of palm oilLeftward shift of the demand curve caused by an adverse change in consumer preferences
- A significant price hike in yam tubers (a complementary good consumed with palm oil)Leftward shift of the demand curve caused by a price rise of a complement
Answer
1. Price increase of groundnut oil matches Rightward shift of the demand curve caused by a price rise of a substitute. 2. Drop in palm oil selling price matches Downward movement along the demand curve indicating an increase in quantity demanded. 3. Health report discouraging consumption matches Leftward shift of the demand curve caused by an adverse change in consumer preferences. 4. Price hike in yam tubers matches Leftward shift of the demand curve caused by a price rise of a complement.
Each economic event is accurately mapped to its geometric effect. Own-price changes produce movements along the demand curve, while non-price determinants such as substitute prices, complement prices, and consumer tastes shift the demand curve in the appropriate direction.
Step-by-Step Solution
Key Concept
Determinants of Demand vs. Price Changes
Estimated Time:1m 30s