Movement along a Demand Curve

vs.
Shifting the Demand Curve
P
Price

Price
P1 P
Demand

D D1
Quantity Q Q1 Quantity Q Q1
 Law of Demand
Holding all other things
P constant (ceretis paribus),
a decrease in price will
result in an increase in
Price

P1 quantity demanded

Demand

Quantity
Q Q1
 Movement along a Demand Curve

P As the price declines from

P to P1, the quantity
________ from Q to Q1.
Price

P1

Demand

Quantity
Q Q1
 Movement along a Demand Curve

As the price declines from

P P to P1, the quantity
increases from Q to Q1.
Price

P1
The Law of Demand

Demand

Quantity
Q Q1
 Shift in Demand Factors that shift demand:
1. Consumer income
2. Preference (consumer tastes)
3. Price of substitute or related good
4. Price of complementary good
5. Expectations about income or prices
6. Number of consumers (population)
Price

“Determinants of Demand”
D D1

Quantity
Q Q1
 Factors that shift demand
1. Consumer income
- More income leads to increased
demand
Price

D D1

Quantity
Q Q1 “Determinants of Demand”
 Factors that shift demand
1. Consumer income
- More income leads to increased
demand
- Less income leads to decrease in
demand
Price

D1 D

Quantity
Q1 Q “Determinants of Demand”
 Factors that shift demand
2. Preference (consumer tastes)
- Favorable change leads to increased
demand
Price

D D1

Quantity
Q Q1 “Determinants of Demand”
 Factors that shift demand
2. Preference (consumer tastes)
- Favorable change leads to increased
demand
- Unfavorable change leads to
decrease in demand
Price

D1 D

Quantity
Q1 Q “Determinants of Demand”
 Factors that shift demand
3. Price of substitute or related good
Substitutes can be used in place of each
other
- If the price of a good increases,
demand for the substitute increases
Price

D D1

Quantity
Q Q1 “Determinants of Demand”
 Factors that shift demand
3. Price of substitute or related good
Substitutes can be used in place of each
other
- If the price of a good increases,
demand for the substitute increases
Price

P - If the price of a good decreases.

demand for the substitute decreases

D1 D

Quantity
Q1 Q “Determinants of Demand”
 Factors that shift demand
4. Price of complementary good
Goods that are used together
- If the price of a good increases, demand
for the complementary decreases
Price

D1 D

Quantity
Q1 Q “Determinants of Demand”
 Factors that shift demand
4. Price of complementary good
Goods that are used together
- If the price of a good increases, demand
for the complementary decreases
- If the price of a good decreases,
Price

P demand for the complementary

increases

D D1

Quantity
Q Q1 “Determinants of Demand”
 Factors that shift demand
5. Expectations about income or prices
- If the price is expected to increase,
demand will increase
Price

D D1

Quantity
Q Q1 “Determinants of Demand”
 Factors that shift demand
5. Expectations about income or prices
- If the price is expected to increase,
demand will increase
- If the price is expected to decrease,
demand will decrease
Price

D1 D

Quantity
Q1 Q “Determinants of Demand”
 Factors that shift demand
6. Number of consumers (population)
- If the population increases,
demand will increase
Price

D D1

Quantity
Q Q1 “Determinants of Demand”
 Factors that shift demand
6. Number of consumers (population)
- If the population increases,
demand will increase
- If the population decreases,
demand will decrease
Price

D1 D

Quantity
Q1 Q “Determinants of Demand”
 Shift in Demand
Increase in demand from
D to D1 shows that at the
same price (P), the quantity
_________ from Q to Q1.
Price

D D1

Quantity
Q Q1
 Shift in Demand
Increase in demand from
D to D1 shows that at the
same price (P), the quantity
increases from Q to Q1.
Price

D D1

Quantity
Q Q1
 Movement along a Demand Curve
vs.
Shifting the Demand Curve
P
Price

Price
P1 P
Demand

D D1
Quantity Q Q1 Quantity Q Q1