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Question

Give three reasons (or causes) of a leftward shift of demand curve.

Or

Explain briefly any three factors which lead to 'decrease in demand'.

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Solution

Following are the three causes of a leftward shift of demand curve :

(i) Fall in the income of the consumers: The demand for normal goods decreases with the fall in income. The demand curve for normal goods shift to the left with the fall in the income of the consumers. See Fig. (a).

(ii) Fall in the price of substitute goods: The demand for a good falls with the fall in the price of its substitute goods. As a result the demand curve for the commodity shifts to the left with the fall in the price of its substitute goods. See Fig. (b).

(iii) Rise in the price of complementary goods: The demand for a good falls with a rise in the price of its complementary goods. As a result, the demand curve for the commodity shifts to the left with a rise in the price of its complementary goods. See Fig. (c).


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