Question

Give two reasons for the shift of the demand curve towards the left.

Answer 1

When the demand curve shifts to the left, it indicates a decrease in demand for a product or service at every price level. The two reasons provided for this leftward shift are:

1. Fall in Consumer's Income: A decrease in consumers' income reduces their purchasing power, making them less able to buy goods and services, even if the prices remain the same. For normal goods, this decreases demand, causing the demand curve to shift to the left. Depending on the severity of the income reduction, consumers may cut back on non-essential or luxury items first and may also reduce consumption of basic goods.
2. Rise in the Price of Complementary Goods: Complementary goods are used together, like cars and gasoline, or printers and ink cartridges. If the price of a complementary good rises, the demand for the related good decreases because the overall cost of using both goods together has increased. For example, if gasoline prices increase significantly, the demand for cars may decrease, leading to a leftward shift in the demand curve for cars.