You discover a new clothing store (Store X) across the street from an existing department store (Store Y). Both stores offer the same brands and styles of T-shirts. However, Store X offers their clothing for less. How might this event affect the demand curve for Store Y
People would want fewer items at each price.
The event of a new clothing store, Store X, offering the same brands and styles of T-shirts at a lower price compared to the existing department store, Store Y, may lead to a shift in the demand curve for Store Y. Here's how it might happen:
1. Substitution Effect: Since both stores offer similar products, consumers might be more inclined to shop at Store X due to the lower prices. As a result, some portion of Store Y's customer base might be lured away by Store X, leading to a decrease in the demand for T-shirts at Store Y.
2. Competitive Pressure: The presence of Store X as a direct competitor will put pressure on Store Y to respond. To remain competitive and retain customers, Store Y might be compelled to lower its prices or offer additional incentives to attract shoppers. If Store Y does not respond appropriately, it may experience a decline in demand for its T-shirts.
The overall impact on the demand curve for Store Y will depend on various factors such as the magnitude of the price difference, the perceived quality and reputation of each store, and the overall preferences of consumers. It's important to note that the demand curve for Store Y represents the relationship between the price of T-shirts at Store Y and the quantity of T-shirts demanded, and changes in external factors, such as the entry of a new low-price competitor, can cause the demand curve to shift.