Answer to Question #95129 in Microeconomics for Bobbi

Question

If consumers expect prices to decrease for good X, other things being unchanged, this will shift the: what??

Answer 1

Demand Curve to the left

Changes in prices usually causes a shift in the demand curve, but it is also true that expectation about future prices will also shift the demand curve. When consumers expects price of good X to decrease in the future, they will tend to decrease their spending on the product. They will consume less of product X so that they can wait for the prices to decrease, leading to a decrease in demand. The decrease in demand will the shift the demand curve to the left.