A decline in consumer confidence would cause what change in the demand curve for goods in a typical economy?

A decline in consumer confidence would cause what change in the demand curve for goods in a typical economy?

• A. Demand shifts left; price rises and quantity fall.
• B. Demand shifts right; price and quantity rise.
• C. Movement along the demand curve with unchanged demand.
• D. Demand shifts left because consumer confidence has fallen; price and quantity fall.

Answer: (D)

When people are less confident about the economy, they cut back on spending because they expect worse times ahead. That non-price factor makes the entire demand for goods shift to the left, not just a change in price. If the supply stays the same, a leftward shift means fewer purchases at every price, so the market settles at a lower price and a smaller quantity sold. This is why the description of a leftward shift caused by fallen confidence, with price and quantity falling, is the best fit. The other ideas mix up the direction of the shift or treat the change as a movement along the curve rather than a shift driven by changing confidence.

When people are less confident about the economy, they cut back on spending because they expect worse times ahead. That non-price factor makes the entire demand for goods shift to the left, not just a change in price. If the supply stays the same, a leftward shift means fewer purchases at every price, so the market settles at a lower price and a smaller quantity sold. This is why the description of a leftward shift caused by fallen confidence, with price and quantity falling, is the best fit. The other ideas mix up the direction of the shift or treat the change as a movement along the curve rather than a shift driven by changing confidence.