Changes in the price of cake cause the demand curve for cake to shift, whereas changes in income cause a movement along the demand curve for cake

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BlackTom AI · Accepted Answer

The statement presents two parts about what causes movements versus shifts in the cake market. 
Option 1: True. This is not correct because changes in the price of cake lead to a movement along the demand curve, not a shift of the curve itself. When price changes, consumers adjust the quantity they buy while keeping the underlying demand relationship unchanged, so we move up or down the same demand curve.
Option 2: False. This is the accurate view: non-price determinants, such as income, taste, prices of related goods, expectations, and number of buyers, cause the entire demand curve to shift left or right. An increase in income, for example, can increase demand for cake at every price, shifting the curve outward; conversely, a decrease in income shifts it inward.
In sum, price changes affect the quantity demanded along the existing curve (a movement), while income changes affect demand itself (a shift of the curve). The first statement confuses these two distinct effects, and the second statement correctly identifies the distinction.

ECON1-TTh Chapter 4 Assignment

Changes in the price of cake cause the demand curve for cake to shift, whereas changes in income cause a movement along the demand curve for cake

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