Which of the following combinations would most likely cause the demand curve to shift from AD1 to AD3?

• A. An increase in the price of the good itself and a decrease in the number of buyers
• B. A decrease in population and a decrease in consumer preferences for the good
• C. A decrease in consumer income and a fall in the price of a complementary good
• D. An increase in consumer income and a rise in the price of a substitute good

Answer: (D)

Verified step by step guidance

1. Step 1: Understand that a shift in the demand curve (from AD1 to AD3) means a change in demand at every price level, not just a movement along the curve. This shift is caused by factors other than the good's own price, such as income, preferences, prices of related goods, or number of buyers.
2. Step 2: Recall that an increase in consumer income typically increases demand for a normal good, shifting the demand curve to the right (from AD1 to AD3). Conversely, a decrease in income would shift demand to the left.
3. Step 3: Recognize that the price of a substitute good affects demand: if the price of a substitute rises, consumers tend to buy more of the original good, increasing its demand and shifting the demand curve to the right.
4. Step 4: Analyze the other options: changes in the good's own price cause movement along the demand curve, not a shift; decreases in population or consumer preferences reduce demand, shifting the curve left; decreases in income and complementary good prices typically reduce demand.
5. Step 5: Conclude that the combination of an increase in consumer income and a rise in the price of a substitute good would most likely cause the demand curve to shift rightward from AD1 to AD3.