Question
What principle of Economics is being illustrated in the below response: Good morning everyone! A shift in the demand curve occurs when external factors, such
What principle of Economics is being illustrated in the below response:
Good morning everyone! A shift in the demand curve occurs when external factors, such as public health warnings on cigarette packages, alter consumers' overall willingness to purchase a product at various price points. In this case, the signs persuade smokers to reduce their cigarette consumption. As a result, the demand curve shifts to the left, denoted as the transition from curve D to D. This shift indicates a change in the entire demand schedule for cigarettes, with consumers now being less inclined to buy cigarettes across prices as the whole range. At a specific price point, say $5 per pack, the quantity demanded decreases from 20 cigarettes per day (point A) to 10 cigarettes per day (point B) after the warnings. This illustrates how a shift in the demand curve reflects an altered willingness to buy the product due to factors other than price. Conversely, movements along the demand curve occur when the price of a product changes, but the underlying consumer preferences and factors influencing demand remain constant. In the context of cigarettes, this happens when taxes increase the price of cigarettes. Unlike a shift in the demand curve, the demand curve itself remains unchanged. Instead, the change in price leads to movements along the curve. For instance, if the price of a pack of cigarettes rises from $5 to $10, consumers continue to exhibit the same preferences and willingness to buy. Still, they purchase a different quantity due to the altered price. This movement along the demand curve is depicted as the shift from point A to point C.
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