In market economics, changes in price and non-price determinants produce distinct geometric shifts or movements on a commodity's demand curve. Match each specific market event involving fresh milk on the left with its exact geometric outcome on the demand curve on the right.
- A reduction in the retail market price of fresh milk itselfDownward movement along the demand curve (expansion of quantity demanded)
- A widely publicized medical report highlighting the health benefits of drinking fresh milkOutward (rightward) shift of the demand curve due to a positive change in taste and preference
- A substantial price increase in fruit juice, a substitute for fresh milkOutward (rightward) shift of the demand curve due to the cross-price effect of a substitute
- A decline in average household disposable income during a recession, where fresh milk is a normal goodInward (leftward) shift of the demand curve due to reduced consumer purchasing power
Answer
The correct pairings match: (1) price reduction of fresh milk to downward movement along the curve; (2) medical report favoring milk to an outward shift driven by tastes; (3) price increase of fruit juice to an outward shift driven by substitute cross-price elasticity; and (4) decline in consumer income to an inward shift of the demand curve.
Each economic factor correctly maps to its geometric representation: own-price changes result in movement along the curve, positive preference changes and rising substitute prices shift the curve rightward, and falling income for normal goods shifts the curve leftward.
Step-by-Step Solution
Key Concept
Determinants and Changes in Demand (Movement along vs. Shift of Demand Curve)