In a standard demand model, how do non-price determinants (such as income, tastes, prices of related goods, and expectations) affect demand?

• A. They cause a movement along the existing demand curve by changing the quantity demanded at a given price.
• B. They change only the slope of the demand curve while leaving the intercept unchanged.
• C. They shift the supply curve, changing the market price while leaving the demand curve unchanged.
• D. They shift the entire demand curve left or right, changing demand at every price.

Answer: (D)

Verified step by step guidance

1. Understand that the demand curve shows the relationship between the price of a good and the quantity demanded, holding other factors constant.
2. Recognize that non-price determinants of demand include factors such as consumer income, tastes and preferences, prices of related goods (substitutes and complements), and expectations about future prices or income.
3. Know that changes in these non-price determinants do not affect the price directly but influence consumers' willingness and ability to buy the good at every price level.
4. Therefore, a change in any non-price determinant causes the entire demand curve to shift either to the right (increase in demand) or to the left (decrease in demand), meaning the quantity demanded changes at every price.
5. Distinguish this from a movement along the demand curve, which happens only when the price of the good itself changes, affecting quantity demanded but not shifting the curve.