Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?
A)The equilibrium remains unchanged unless an exogenous variable changes.
B)The equilibrium is represented as the intersection of supply and demand curves.
C)When a shift in demand or supply occurs, a comparative statics analysis compares the old and the new equilibrium points.
D)A change in price will cause a shift in the demand curve.

Question

Quizplus · Accepted Answer

A change in price does not cause a shift in the demand curve. Rather, a change in price leads to a movement along the existing demand curve, referred to as a change in quantity demanded. A shift in the demand curve is caused by a change in a non-price determinant of demand, such as consumer incomes or preferences. A change in price will cause a movement along the demand curve, not a shift in the demand curve itself. A shift in the demand curve would occur if a non-price factor influencing demand, such as consumer preferences or income, were to change.

Suppose That We Illustrate Demand and Supply with Quantity on the Horizontal