In her article, \"The Causes and Consequences of Wal-Mart’s Growth\" ( Journal o
ID: 1103914 • Letter: I
Question
In her article, "The Causes and Consequences of Wal-Mart’s Growth" (Journal of Economic Perspectives, 2007), Emek Basker, a professor at the University of Missouri, discusses reasons for the popularity of Wal-Mart in the U.S. In a related but separate paper, she estimates the income elasticity of demand for products sold at Wal-Mart at -0.5. Given this result, which of the following will shift the demand curve for products sold at Wal-Mart to the right: (Pick the single best/correct answer.)
A reduction in average income per capita (such as during the recent economic downturn in the U.S.)Explanation / Answer
1.A reduction in average per capita income would shift the demand curve to the left because people can buy fewer commodities at the existing prices.
2.A decrease in price causes movement along the demand curve.It does not shift the demand curve.
3.A reduction in the cost of inventory management system that Wal-Mart uses would affect the supply curve by affecting the marginal cost.Demand is unaffected.
4.A reduction in the price of products sold by the competitor would shift the femand curve to the left because because would switch to the low price products offered by the competitor.
5.An increase in the number of stores would increase the supply and reduce the price.Due to more number of stores people can buy more Wal-Mart products at the existing prices which would lead to a shift in demand to the right.
5 is correct