Question

Your company, a food manufacturer, is trying to assess the impact of events on the demand curve for a product (product X) that your company is actively trying to promote through advertising. For the three events, indicate if would change a shift in the demand curve, and if yes, what direction is the shift.

Circle, shade, or indicate your answer for all three events.

Event Demand Curve Shift? Yes or No Direction of Shift?
1. Increase in price of a complementary product Yes No Increase, Decrease, NA
2. Increase in the price of the product X Yes No Increase, Decrease, NA
3. Launch of effective advertising campaign for product X Yes No Increase, Decrease, NA

Answer 1

The demand curve for product X shifts left with an increase in the price of a complementary product, doesn't shift with a price increase of product X itself, and shifts right with an effective advertising campaign.

Step-by-step explanation:

When assessing the impact of various events on the demand curve for a product, each event must be considered in terms of how it alters consumer behavior and demand factors:

1. An increase in the price of a complementary product typically leads to a decrease in the demand for the product in question, causing the demand curve to shift to the left.
2. An increase in the price of product X itself does not shift the demand curve, but rather moves along the curve, reflecting a change in quantity demanded, rather than a change in demand.
3. Launching an effective advertising campaign for product X is likely to increase consumer interest and demand, shifting the demand curve to the right to reflect an increase in the quantity demanded at each price level.