Management Notes

Management Notes

Reference Notes for Management
Movement Along Demand Curve and shift of Demand Curve

Movement along Demand Curve and Shifts of Demand Curve | Microeconomics

by

Movement along Demand Curve and Shifts of Demand Curve

Movement along Demand Curve and Shifts of Demand Curve

➦ The demand curve is a graphic representation of a demand schedule. It is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at any given price.

➦ Demand curves are used to estimate behaviors in competitive markets and are often combined with supply curves to estimate the equilibrium price and the equilibrium quantity of that market.

➦ Movement along the demand curve and shifts of the demand curve are fundamental concepts in economics that describe how changes in various factors affect the quantity demanded of a good or service and, consequently, its price and the overall market equilibrium.

Movement along the Demand Curve:

Movement Along the demand curve

➨ This concept refers to changes in the quantity demanded of a good or service due to a change in its price, while all other factors remain constant (ceteris paribus).

➨ When the price of a product decreases, the quantity demanded usually increases, and when the price increases, the quantity demanded typically decreases.

➨ This relationship is known as the law of demand, which states that, all else being equal, there is an inverse relationship between price and quantity demanded.

For example:

if the price of a coffee latte decreases from $5 to $4, and the quantity demanded increases from 100 lattes per day to 120 lattes per day, this represents a movement along the demand curve.

Shifts of the Demand Curve:

Shifts of the demand curve

➨ Shifts of the demand curve occur when factors other than price influence the quantity demanded at each price level.

➨ These factors include changes in consumer preferences, income, the prices of related goods (substitutes and complements), population, and expectations about the future.

➨ Shifts can either be to the right (increase in demand) or to the left (decrease in demand) of the original demand curve.

a. Increase in Demand (Shift to the Right):

➨ Factors that can increase demand include higher consumer income, a positive change in consumer preferences, increased advertising, or an increase in the population.

➨ An increase in demand leads to a higher quantity demanded at each price level, which means people are willing to buy more of the product at any given price.

➨ This shift results in a new equilibrium with a higher price and quantity traded.

b. Decrease in Demand (Shift to the Left):

➨ Factors that can decrease demand include a decrease in consumer income, negative changes in consumer preferences, decreased advertising, or a decrease in the population.

➨ A decrease in demand leads to a lower quantity demanded at each price level, which means people are willing to buy less of the product at any given price.

➨ This shift results in a new equilibrium with a lower price and quantity traded.

 Movement  Along Demand  Curve

(Change In Quantity Demanded)

Shift Of Demand Curve

(Change In Demand)
Movement  Along Demand Curve is the change in quantity demanded for a good due to change in the price of the same good. Shift Of Demand Curve is the change in demand for a well due to change in factors other than price.
Extension of demand occurs when demand for a quantity increases with the fall in price. This is the case of rightward movement along the same demand curve. An increase in demand occurs when demand increases with the change in factors other than price. This is the case of a rightward shift in the demand curve.
Contraction of demand occurs when demand for a quantity decreases with the rise in price. This is the case of leftward movement along the same demand curve. A decrease in demand occurs when demand decreases with the change in factors other than price. This is the case of the leftward shift in the demand curve.
Movement  Along Demand Curve is expressed by the different points on the same demand curve. Shift Of Demand Curve is expressed by the shift in the entire demand curve either rightwards or leftward.

 

References

  • Movement along the Demand Curve and Shift of the Demand Curve. (2019, December 2). Toppr-guides. https://www.toppr.com/guides/business-economics/theory-of-demand/movement-along-the-demand-curve-and-shift-of-the-demand-curve/

Related Posts

Smirti
Latest posts by Smirti (see all)

Leave a Comment