Answer to Question #317581 in Microeconomics for amcee

Question

in economic theory , a clear distinction is made between a movement along the demand curve and a movement of the demand curve in the light of this statement ,provide the correct graph to illustrate and explain an increase in the price of the product

Answer 1

Movement along the demand curve occurs when there is a change in quantity due to a change in price while all other factors such as change in income or advertisement remain the same. As a result of the above, there is movement along the same demand curve.

On the other hand the demand curve shifts when a factor such as increase in income, preference or advertisement are either boosted or diminished. The demand curve will shift outwards or inwards respectively.

The figure below illustrates the effect of different incomes on the demand curve.