Exercise 2: Substitute Good Entering the Market — Shift, Not Movement — Possible Solution ================================================================================================ A movement along a demand curve happens only when the good's OWN price changes - nothing else. Reading a different point on the same fixed curve is exactly what happens when you raise or lower the price of the good itself and watch quantity demanded respond. A new, cheaper substitute entering the market is a genuinely different kind of event. The original good's own price hasn't changed at all - what's changed is an outside factor: buyers now have an attractive new alternative they didn't have before. At every possible price the original good might be sold at, some buyers will now choose the cheaper substitute instead, meaning quantity demanded for the original good is lower than before AT EVERY PRICE POINT, not just at one specific price. Since the entire relationship between price and quantity demanded has changed (less is now demanded no matter what price the original good is set at), this isn't a single point moving along an unchanged curve - it's the whole curve itself shifting leftward, representing reduced demand across the board. A movement along the curve could only be observed if the original good's own price had changed instead of a new competing option appearing. ANSWER: This is a shift of the whole demand curve, not a movement along it, because the original good's own price never changed - what changed was an external factor (a new, cheaper substitute) that reduces quantity demanded at every possible price, not just at one specific price point, which is exactly what a curve shift (as opposed to movement along a fixed curve) means. WHY THIS WORKS AS AN ANSWER ------------------------------ This correctly applies the chapter's own defining test (did the good's own price change, or did something else change) and explains why the substitute's effect operates across every price point rather than just one.