Q39. Refer to the demand curves shown above. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1?

Background

Topic: Demand Curve Shifts

This question tests your understanding of what factors cause the demand curve for a good to shift, rather than just a movement along the curve. It also asks you to interpret a graph showing a leftward shift in demand for Dr. Pepper.

Key Terms and Concepts:

• Demand Curve: Shows the relationship between the price of a good and the quantity demanded at each price.

• Shift in Demand: Occurs when a non-price determinant of demand changes (e.g., income, prices of related goods, tastes).

• Normal Good: A good for which demand increases as income increases.

• Substitute Good: A good that can replace another; an increase in the price of a substitute increases demand for the original good.

Step-by-Step Guidance

1. Examine the graph: The demand curve shifts from D0 to D1, which is a leftward shift. This means at every price, consumers are now willing to buy fewer bottles of Dr. Pepper.

2. Recall what causes a demand curve to shift left: A decrease in demand can be caused by a decrease in income (for a normal good), a decrease in the price of a substitute, or a change in tastes away from the good.

3. Review the answer choices and identify which ones relate to these determinants:

   • A decrease in income (assuming Dr. Pepper is a normal good)

   • An increase in the price of 7-UP (a substitute)

   • A decrease in the price of Dr. Pepper (would cause movement along the curve, not a shift)

   • A reduction in the price of sugar (an input, affects supply, not demand)

4. Focus on the option that would decrease demand for Dr. Pepper, causing the shift from D0 to D1.

Try solving on your own before revealing the answer!