I don't understand why C's answer is movement along the AD curve, I thought that when people perceive prices to be lower then they are more willing to spend money for g&s's, raising consumption
Great question! I assume you're talking about 7:30 in the video. The key is that PRICES are changing. The change in P does in fact increase consumption. And we model this by moving down along the AD curve. Because of the way it is constructed, a change is price ALWAYS is modeled by a movement along the AD curve. Anything else that changes, except price, shifts the curve itself.
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how am i possibly supposed to retain all of this info for an exam. thats honestly crazy
Hahaha good luck. I'm rooting for you 🤞
I don't understand why C's answer is movement along the AD curve, I thought that when people perceive prices to be lower then they are more willing to spend money for g&s's, raising consumption
Great question! I assume you're talking about 7:30 in the video. The key is that PRICES are changing. The change in P does in fact increase consumption. And we model this by moving down along the AD curve. Because of the way it is constructed, a change is price ALWAYS is modeled by a movement along the AD curve. Anything else that changes, except price, shifts the curve itself.