Which of the following may be reasons for substantial shifts in business expectations?

• A. Constant input prices
• B. Changes in government policies
• C. Stable consumer preferences
• D. Unchanging technology

Answer: (B)

Verified step by step guidance

1. Understand that business expectations refer to the anticipations firms have about future economic conditions, which influence their investment and production decisions.
2. Recognize that substantial shifts in business expectations typically arise from factors that affect the economic environment or profitability prospects, such as changes in government policies, technology, or consumer preferences.
3. Analyze each option: constant input prices imply stability, which is unlikely to cause shifts; stable consumer preferences also suggest no change in demand expectations; unchanging technology means no new innovations to alter expectations.
4. Identify that changes in government policies can create uncertainty or new opportunities, thus significantly shifting business expectations.
5. Conclude that among the given options, changes in government policies are the most plausible reason for substantial shifts in business expectations.