Shifts in Demand Curve

We learned that the demand function expressed the quantity demanded as a function of price, while the other factors are held constant.

If the price of a good or service changes, and there is no change in the other factors affecting demand such as income levels, and prices of related products, then there will be a movement along the existing demand curve.

This movement along the curve indicates that when prices decrease, consumption increase (demand increases), and when prices increase, consumption decreases.

However, if any of the other factors affecting the quantity demanded also changes, then the complete demand curve will shift to a new level either to the left or to the right. There is a change in the quantity demanded at every price level.

A shift in demand curve to the right indicates that the demand for goods and services has increased due to a change in one of the determinants of demand. For example, the overall income of consumers may have increased or a substitute product may have become expensive.

A shift in demand curve to the left indicates that the demand for goods and services has decreased due to a change in one of the determinants of demand. For example, the overall income of consumers may have decreased, people might have lost jobs or people may be expecting a price fall in the future.

The following chart illustrates both a movement and a shift in demand curve.