Distinguishing demand extension from demand shift

Steps:

• Identify "extension in demand" as movement along the demand curve due to price change, not a shift.
• Analyze each option's effect on price or demand curve.
• Reduction in production costs shifts supply right, lowering price and causing extension along demand curve.
• Non-price factors like weather or advertising shift the demand curve right, increasing demand.

Why B is correct:

• Per the law of supply, lower production costs increase supply, reducing equilibrium price and extending quantity demanded along the fixed demand curve.

Why the others are wrong:

• A: Hot weather shifts demand curve right, increasing demand at every price.
• C: Rival exit reduces competition, shifting demand for this firm's drink right.
• D: Successful advertising boosts consumer preference, shifting demand curve right.

Final answer: B