Managerial Economicsintermediate
Arrange the steps to determine whether a market event causes a movement along a demand curve or a shift of the demand curve.
Answer
Identify which economic variable has changed, Determine whether that variable is the good's own price or a non-price determinant, Conclude whether the change represents a movement along the curve or a shift of the curve, Plot the resulting change in quantity demanded or the shifted curve on the graph
Explanation
### The order
1. **Identify which factor changed**: You need to know the cause before classifying the effect.
2. **Determine whether the factor is the good's own price**: This separates a price change from other determinants.
3. **Classify an own-price change as movement along the curve**: The curve already describes own price and quantity demanded.
4. **Classify a change in another determinant as a shift**: Income, tastes, and related-good prices change demand at each own price.
### Remember
First identify the cause, then decide whether the curve moves or shifts.
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