Question

What will be the impact of the following changes on the demand curve of :
(i) Cars when there is an increase in price of petrol
(ii) Desktop Computers with increase in price of Laptops
(iii) Bread with increase in its price
(iv) Trousers due to change in preference in favour of Jeans
(v) Bajra for a poor person when income of such person rises
(vi) Coffee when price of tea falls
(vii) Petrol if its price is expected to rise in near further.

Answer 1

(i) Demand curve of Cars will shift towards left with increase in price of petrol (complementary good) as it will become relatively costly to use both the goods (Car and Petrol) together
(ii) Demand curve of Destop Computers will shift towards right with increase in price of Laptops (substitude good) as it will become relatively cheaper to use desktop computers instead of laptops.
(iii) There will be no change in demand curve of Bread. There will be only an upward movement along the same demand curve
(iv) Demand curve of Trousers will shift towards left as preference in favour of jeans will decrease the demand for trousers (assuming trousers and jeans are substitues).
(v) Demand curve of Bajra for a poor person will shift towards left as with increase in income, poor person will shift from bajra to other superior substitutes (like wheat or rice)
(vi) Demand curve of Coffee will shift towards left with fall in price in tea (substitude good) as it become relatively costly to use coffee instead of tea.
(vii) Demand curve of Petrol will shift towards right as expectation of price rise in future will increase the demand of petrol in the present period.