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Shifts in Demand Sample Problem

Which of the following would cause an increase in the demand for apples?

Choice A: A decrease in consumer incomes (apples are a normal good).

Choice B: A decrease in the price of apples.

Choice C: An increase in the number of firms in the market.

Choice D: An increase in the price of pears, a substitute for apples.

Choice A is incorrect because a decrease in consumer incomes should cause a decrease in demand for apples, given that apples are a normal good. Choice A would be true if apples were an inferior good, meaning that when people have less money they buy more apples rather than some preferred alternative, which would increase demand for apples.

Choice B is incorrect because a decrease in price of apples would be a movement along the demand curve, increasing the quantity demanded, but not increasing demand. The demand curve does not shift when the price changes, because the demand curve already is a representation of the quantity demanded at each price point.

Choice C is incorrect because an increase in the number of firms (apple producers) would increase the supply of apples (shift of supply curve to the right). When the supply curve shifts to the right it means that the quantity supplied is greater than before at each price point, which would represent a movement along the demand curve to this new equilibrium quantity. The quantity demanded of apples would increase, but the demand for apples does not change.

Choice D is correct because an increase in the price of pears (a substitute good for apples) would cause more people to buy apples, rather than pears, increasing the demand for apples (shifting the demand curve to the right).

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