Answer to Question #199742 in Microeconomics for Sarah

Question

Answer true or false

An increase in demand is reflected as a rightward (outward) shift of the demand curve and is caused by an increase in PRICE?

Answer 1

Solution:

The statement is false.

A demand curve is a curve that shows the upward or downward movement along the demand curve due to an increase in price or decrease in price for a product or service. Therefore, it means that quantity demanded changes due to change in price for a product.

When the demand increases, there is a shift in the demand curve outward to the right due to various factors (non-price determinants) such as an increase in taste and preferences, increase in consumers income, increase in population, increase in the price of related goods, and future expectations. It refers to a situation where the demand gets changes due to various other factors other than the price of the same commodity. The demand curve shifts rightward that increases both price and output in an economy.