Factors Affecting Demand

Summary: What Factors Shift Demand?

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Question 1

You are a consultant analyzing the American car market for the new Toyota Prius. Your chief competitor Tesla has recently dropped the list price of their vehicles by 20%. When illustrating shifts of the demand curve it is customary to draw arrows to show the direction of change. Which directions should the arrows be drawn in the graph below? Which curve represents old demand and which curve the new demand?


    • The arrows should be drawn pointing leftwards, The curve on the right represents the old demand and the curve on the left new demand.
    • The arrows should be drawn pointing rightwards. The curve on the right represents the new demand and the curve on the left old demand.
    • The arrows should be drawn pointing leftwards. The curve on the right represents the new demand and the curve on the left old demand.

Question 2

You are in charge of data analytics for Home Depot's South Florida division. Recently you have observed a change in the market for power generators illustrated below. Which explanation best corresponds with the observed data?


    • A hurricane is expected to arrive next week.
    • The price of a competitor's generators has fallen.
    • The price home depot generators has dropped 20%