Economics 7

CFA Level I Economics
#1

A decrease in the price of a good will most likely be reflected in a:

  1. change in the intercept of the demand curve.
  2. change in the slope of the demand curve.
  3. downward movement along the demand curve.

Solution

C is correct. A decrease in the price of a good will cause consumers to demand more of a good and be reflected by a downward movement along the demand curve.

A is incorrect because a change in the intercept of the demand curve (a shift up or down without a change in slope) occurs when a variable other than own-price takes on a different value.

B is incorrect because the slope of the demand curve is the coefficient on Q (quantity) in the inverse demand curve, showing the change in P (price) for a 1-unit change in Q. A change in the slope of the demand curve occurs when the relationship between price and quantity changes

Please help me understand the difference between. the slope of the demand curve. slope along the demand curve. i have strong confusion with this.
Thank You!!

#2

The slope of the demand curve is the change in the price of a good divided by the change in the quantity of that good that is demanded:

slope_{demand\ curve} = \frac{\Delta price}{\Delta quantity\ demanded}\

There is no such thing as the slope along the demand curve.

#3

Thanks for helping!!

#4

My pleasure.