Question

- Consider the market demand for hot dogs.

Complete the following table by indicating whether an event will cause a movement along the demand curve for hot dogs or a shift of the demand curve for hot dogs, holding all else constant.

1. An increase in the price of hot dogs
2. A decrease in income of consumers
3. A change in the expectations of consumers about their future income

Answer 1

An increase in the price of hot dogs causes a movement along the demand curve, while a decrease in consumer income and changes in income expectations shift the curve. Prices of substitute and complement goods affect demand for related items, like hamburgers, but the overall impact requires analysis of combined effects.

Step-by-step explanation:

Understanding Market Demand and Changes

When analyzing the impact of different events on the market demand for hot dogs, it's crucial to distinguish between a movement along the demand curve and a shift of the demand curve. Here is how each provided event affects the demand:

1. An increase in the price of hot dogs will cause a movement along the demand curve. This is because when the price changes, the quantity demanded changes by the original demand curve.
2. A decrease in the income of consumers, assuming hot dogs are a normal good, would cause the demand curve to shift to the left. With less income, consumers are less willing or able to buy hot dogs in the same quantities as before.
3. A change in the expectations of consumers about their future income could shift the demand curve. If they expect higher future income, the demand may increase (shift to the right), believing they will have more money to spend. If they expect lower future income, demand may decrease (shift to the left).

It is also important to differentiate the effects of changes in prices of related goods. For instance, considering the demand for hamburgers:

1. If the price of a substitute good like hot dogs increases, the demand for hamburgers might increase, leading to a rightward shift in the demand curve.
2. Simultaneously, if the price of a complementary good like hamburger buns increases, the demand for hamburgers might decrease, shifting the demand curve to the left.

Determining the overall impact on hamburger demand requires analyzing the combined effects of both the substitute's and complement's price changes. Without more information about consumers' preferences and sensitivities to price changes, it's not possible to conclude definitively which effect is stronger.