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IAI Actuarial Core Principles · Business Economics · Consumer demand and behaviour

Daily demand for a ride-hailing service in Pune falls when the fare per trip rises, with all other influences unchanged. Which of the following would be shown as a shift of the demand curve to the left rather than a movement along it?

A fall in consumers' incomes for a normal good shifts the demand curve left, because less is demanded at every price. Changes in the fare itself only move along the curve, and driver numbers or fuel costs shift the supply curve instead.

  1. AA rise in the fare charged per trip
  2. BA fall in the fare charged per trip
  3. CA fall in consumers' incomes, where the service is a normal goodCorrect
  4. DA rise in the number of drivers willing to work
  5. A fall in the cost of fuel for drivers

Explanation

A change in the good's own price causes a movement along the demand curve. A fall in income for a normal good reduces quantity demanded at every price, so the curve shifts left. Driver numbers and fuel costs affect supply, not demand.

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