Question

This is an economics paper. How do you do it?

Answer 1

Answer: Number 1; I'll move to point D (change in quantity demanded)

Number 2; I'll move to point D (change in demand)

Number 3; I'll move to point F (change in demand)

Number 4; I'll move to point C (change in demand)

Explanation: A change in demand and a change in quantity demanded as similar as they may sound have a clear difference. A change in quantity demand is identified by a movement along the demand curve as a result of changes in the price of the commodity. A change in demand is identified by a complete change from one demand curve to another due to other factors affecting demand (apart from the price of the commodity). As shown in the graph, moving from point A to point B represents a change in quantity demanded, however when the entire demand curve AB moves over to CD, what you have is a change in demand.

For question 1, if the price were to rise (all things being equal) from point C, my quantity demanded would fall to point D. The law of demand states that the higher the price of a commodity, the lower the quantity being demanded.

For question 2, if the price of the commodity were to rise from point A, ideally am supposed to move to point B (law of demand). However my income level has increased which gives me the opportunity to increase my level of demand, and given that its a normal good, I can afford to buy more of it. Hence, rather than move to point B, my demand has changed and I can now move to point D.

For question 3, if at point D, I find out that there would be a price increase  next week, then I will move to point F. An increase in price would have resulted in buying less quantity, but this is an instance of increased demand  in anticipation of a future increase in price, one of the characteristics of "abnormal demand". This is a typical consumer behavior, since no one wants to be caught unawares, a consumer would rather buy more if he/she finds out that  the price is about to increase which would translate to him/her having little or no option other than to reduce quantity demanded.

For question 4,  if the price were to fall, ideally am supposed to move to point E (law of demand). However two factors have been given, an increase in my income and the commodity being an inferior good. Consumers normally consume less of an inferior good (such as staple foods) if their income level rises since they are now able to afford higher quality goods and higher standard of living. Hence, even with a fall in price of the goods, I will move to point C (where I am consuming less of it)