A shift in demand curve is when a determinant of demand other than price changes.
The position of the demand curve will shift to the left or right following a change in an underlying determinant of demand other than price.
Any change that raises the quantity that buyers wish to purchase at a given price shift the demand curve to the right.
Any change that lowers the quantity that buyers wish to purchase at a given price shift the demand curve to the left.
Shift in demand curve Example
Suppose that the American Medical Association suddenly announces a new discovery. People who regularly eat ice cream live longer, healthier lives.
How does this announcement affect the market for ice cream?
The discovery changes people’s tastes and raises the demand for ice cream. At any given price, buyers now want to purchase a larger quantity of ice cream, and the demand curve for ice cream shifts to the right.
Whenever any determinant of demand changes, other than the good’s price, the demand curve shifts.
Similarly, any change that reduces the quantity demanded at every price shifts the demand curve to the left.
|VARIABLES THAT AFFECT QUANTITY DEMANDED||A CHANGE IN THIS VARIABLE|
|Price||Represents a movement along the demand curve|
|Income||Shifts the demand curve|
|Price of related goods||Shifts the demand curve|
|Tastes||Shifts the demand curve|
|Exceptions||Shifts the demand curve|
|Number of buyers||Shifts the demand curve|
Because the price is on the vertical axis when we graph a demand curve, a change in price does not shift the curve but represents a movement along it.
By contrast, when there is a change in income, the prices of related goods, tastes, expectations, or the number of buyers, the quantity demanded at each price changes; this is represented by a shift in the demand curve.
Shifts the demand curve Factors
A demand curve shifts when a determinant other than prices changes. for example:
- Income of the buyers.
- Consumer trends and tastes.
- Expectations of future price, supply, needs, etc.
- The price of related goods.
If the price changes, then the demand curve will show how many units will be sold.
But if the price remains the same, and the income changes, then that changes the amount purchased at every price point.
People can buy more of what they want when they have more income.
Of course, the seller will probably raise the price at some point in future, causing inflation.
But at least in the short-term, the price will remain the same and the quantity sold will increase.
demand curve Summary
The Shifts in demand curve shows what happens to the quantity demanded of a good when its price varies. Holding constant all other determinants of quantity demanded.
When one of these other determinants changes, the demand curve shifts.