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Demand Curve Questions

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1. The price of Pepsi Cola increases from $0.50 per can to $0.75 per can, ceteris paribus. Will this cause a movement along the demand curve for Coca-Cola or a shift in the demand curve for Coca-Cola? In which direction (be specific, not just left or right)? Why?

2. The price of whisky increases from $25 per bottle to $40 per bottle, ceteris paribus. Will this cause a movement along the demand curve for Coca-Cola or a shift in the demand curve for Coca-Cola? In which direction (be specific, not just left or right)? Why? (Note: whisky and Coke are often consumed together)

3. A new fad diet sweeps across the nation suggesting the high levels of caffeine and sugar will increase weight loss, decrease blood pressure, and increase life expectancy by 20 years, ceteris paribus. (Yes, I am making this stuff up) Will this cause a movement along the demand curve for Coca-Cola or a shift in the demand curve for Coca-Cola? In which direction (be specific, not just left or right)? Why?

4. The number of people in the U.S. between the ages of 10 and 60 increases over the next 20 years by 100%, ceteris paribus. Will this cause a movement along the demand curve for Coca-Cola or a shift in the demand curve for Coca-Cola? In which direction (be specific, not just left or right)? Why?

Solution Preview

1. This will cause a movement along the demand curve. If the price increases, quantity demanded will decrease and the movement will be UP the demand curve.

2. Whisky and Coke are complements. Thus, if price ...

Solution Summary

The solution goes into a great amount of detail about the questions being asked. The responses are excellent and very well written. Overall, a great response.

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