Which of the following determine(s) the demand curve for a good?
I. Disposable income.
II. Price of the good demanded.
III. Availability of substitutes.
IV. Consumer tastes and preferences.
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A. B. C. D.B
You should be careful about distinguishing between a movement of the demand curve and a movement along the demand curve. When the demand curve moves, the price for every quantity that may be demanded changes. Such a move can come about when people's disposable income changes. An increase in income moves the demand curve to the right, since for every given price, the quantity demanded is higher at higher incomes. Similarly, an increase in the availability of substitutes moves the demand curve to the left, since for every given price, the quantity demanded is now lower. Further, as the consumers' tastes and preferences evolve over time, so will the demand curve for a good. However, a simple change in the price of the good demanded will only lead to an adjustment in the quantity demanded, without moving the demand curve. After all, that is the definition of a demand curve!