Author Question: Differentiate between a change in quantity demanded and a change in ... (Read 109 times)

tichca · **on:** Jun 30, 2018

Differentiate between a change in quantity demanded and a change in demand.

Question 2

If consumption were a direct function of disposable income, how would a decrease in personal taxes or an increase in transfer payments affect consumption?

kjo;oj · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A change in a good's own, current price is said to lead to a change in quantity demanded. The movement happens along the demand curve. Changes in factors other than price can shift the entire demand curve. A change in demand happens due to changes in the prices of related goods, income, number of buyers, tastes, and expectations.

Answer to Question 2

Consumption would increase if personal taxes decreased since this would increase disposable income (total income would not have changed as a result of the taxes). An increase in transfer payment income would also similarly cause an increase in consumption.