University of Central Florida (UCF) ECO2013 Principles of Macroeconomics Practice Exam 1

When consumer expectations indicate that future prices are expected to rise, it typically leads to an increase in current demand. This phenomenon occurs because consumers tend to act in anticipation of higher costs. If individuals believe that goods will become more expensive in the future, they are motivated to purchase those goods now rather than waiting. This immediate demand surge can shift the demand curve to the right, indicating that at the current price level, more quantities are demanded.

In this scenario, consumers are making rational decisions based on their expectations about future price changes. They may wish to stock up on items that they anticipate will cost more later or might shift their purchasing decisions to avoid potential higher prices.

Demand remaining unchanged or decreasing would not align with the rationale that consumers typically respond to expected price increases by adjusting their current purchasing behavior. The concept of elasticity, while relevant in the broader context of how demand responds to price changes, does not directly apply to this specific scenario about consumer expectations regarding future pricing.