From the course: Managerial Economics
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Shift of the demand curve
From the course: Managerial Economics
Shift of the demand curve
- In this video, we want to solve a mystery that confuses many decision-makers. We need to learn how to distinguish between a shift on the demand curve and a shift off the demand curve. I would like to use an example from the Swiss retail market where two large grocery chains, Migros and Coop, have been dominating the industry for decades. But in 2009, two German discounters announced plans to aggressively enter the Swiss market by building their own stores outside of larger cities. Everyone would assume that prices at Migros and Coop would decrease once they face competition from Lidl and Aldi. The question I have for you is, starting with a given demand curve for a typical product at Migros, how can you explain, in economic terms, why the market entry of competitors would lead to a lower price? Let's start with the current demand. At the price of 10 francs Migros can sell 500 units in a given period of…
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