The phrase “demand has increased” means
a. The demand curve has shifted to the right
b. The demand curve has shifted to the left
c. There has been upward movement along the demand curve
d. There has been downward movement along the demand curve
The correct answer and explanation is :
The correct answer is:
a. The demand curve has shifted to the right
Explanation:
When the phrase “demand has increased” is used in economics, it refers to a shift in the entire demand curve to the right. This means that at every price level, consumers are now willing to purchase more of the good or service than before. This is different from a change in the quantity demanded, which is a movement along the demand curve due to a change in the price of the good.
Why the demand curve shifts to the right:
The demand curve shows the relationship between the price of a good and the quantity that consumers are willing to buy. It generally slopes downward from left to right, showing that as prices fall, demand increases (the Law of Demand). However, the entire demand curve can shift due to changes in factors other than the price of the good itself. These factors include:
- Income: If consumers experience an increase in income, they may be able to buy more goods, leading to an increase in demand.
- Consumer preferences: If a good becomes more fashionable or desirable, more people will want to buy it at every price level, causing demand to increase.
- Population: An increase in the number of consumers in a market can lead to higher overall demand.
- Expectations: If consumers expect future prices to rise, they may purchase more of a good now, which leads to increased current demand.
- Substitute goods: If the price of a substitute good rises, consumers may buy more of the good in question, increasing its demand.
- Complementary goods: If the price of a complementary good (a good that is typically used together with the good in question) decreases, the demand for the good in question may increase.
When any of these factors change in such a way that consumers are willing to buy more at every price level, the demand curve shifts to the right, indicating an increase in demand.
Distinction from other choices:
- b. The demand curve has shifted to the left: This would indicate a decrease in demand, not an increase.
- c. There has been upward movement along the demand curve: This refers to an increase in price, not an increase in demand.
- d. There has been downward movement along the demand curve: This refers to a decrease in price, not an increase in demand.
Thus, the correct interpretation of “demand has increased” is a rightward shift of the demand curve.