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Question 292 of 318

Which of the following scenarios would most likely lead to a decrease in the demand for a normal good?

  • An increase in consumer income
  • A decrease in the price of a substitute good
  • A successful advertising campaign for the product
  • A rise in the price of a complementary good

Correct Answer: B

Explanation
The correct option is B. A decrease in the price of a substitute good. Detailed Explanation: To understand why option B is the correct answer, we need to first clarify what is meant by "normal goods" and the factors that influence demand. Normal Goods: These are goods for which demand increases when consumer income rises and decreases when consumer income falls. In other words, as people have more money, they tend to buy more of these goods. Demand Factors: The demand for a good can be influenced by several factors, including: - Consumer income - Prices of related goods (substitutes and complements) - Consumer preferences - Expectations about future prices - Advertising and marketing efforts Now, let’s analyze each option: Option A: An increase in consumer income
  • Why it's incorrect: For normal goods, an increase in consumer income typically leads to an increase in demand. If consumers have more money, they are likely to buy more of the normal good, not less. Therefore, this option does not lead to a decrease in demand.
Option B: A decrease in the price of a substitute good
  • Why it's correct: Substitute goods are products that can replace each other. For example, if the price of tea decreases, consumers may choose to buy more tea instead of coffee (assuming coffee is the normal good in this scenario). As a result, the demand for coffee would decrease because consumers are switching to the cheaper substitute. This is a classic case of the substitution effect, where consumers opt for the less expensive alternative, leading to a decrease in demand for the normal good.
Option C: A successful advertising campaign for the product
  • Why it's incorrect: A successful advertising campaign typically increases consumer awareness and interest in a product, which usually leads to an increase in demand. If consumers are more aware of the benefits or features of the normal good, they are likely to purchase more of it, not less.
Option D: A rise in the price of a complementary good
  • Why it's incorrect: Complementary goods are products that are often used together, such as printers and ink cartridges. If the price of a complementary good rises, the demand for the normal good is likely to decrease because the overall cost of using both goods together has increased. However, this option does not directly lead to a decrease in demand for the normal good itself; rather, it affects the relationship between the two goods.
Summary of Key Points:
  1. Normal goods see increased demand with rising incomes and decreased demand with falling incomes.
  2. Substitutes: A decrease in the price of a substitute good leads consumers to switch to that substitute, decreasing demand for the original normal good.
  3. Advertising generally increases demand, while a rise in the price of a complementary good can decrease demand but does not directly affect the normal good's demand as strongly as a substitute's price change.
  4. Understanding the relationships between goods (substitutes and complements) is crucial for analyzing demand shifts.
Revision Summary:
  • Normal goods see demand increase with higher income and decrease with lower income.
  • A decrease in the price of a substitute good leads to a decrease in demand for the normal good.
  • Successful advertising typically increases demand for the product.
  • A rise in the price of a complementary good can decrease demand but is not as direct as the effect of substitutes.
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