Movement Along a Demand Curve - Online Tutor, Practice Problems & Exam Prep

Demand can change due to various determinants, excluding price changes, which only affect quantity demanded along the demand curve. An increase in demand shifts the curve rightward, indicating higher quantity demanded at the same price. Factors like consumer preferences and income influence demand, while ceteris paribus conditions hold. Understanding these distinctions is crucial for grasping concepts like elastic demand, consumer surplus, and market equilibrium, which are foundational in economics.

Shifting Demand - Warning!

Alright, so now we're going to discuss some of the things that can cause demand to change. So there's going to be certain events that cause shifts in our graph. Our demand line might move from where it originally was and I want to make a big bold warning right quick that a change in price is not going to shift the demand curve. We're only going to move along the demand curve, not shift and draw a whole new curve. Cool? So let me show you an example on these graphs real quick. So we've got on the left we're going to discuss a change in price, and on the right we're going to talk about other determinants of demand. When I say determinant, it's something that determines demand, right? What makes demand what it is? It's other factors that we're going to discuss these other things that happen in the background. Cool, but first let's talk about this change in price. So remember first things first, let's label our axis, we've got price here and quantity here right? Alphabetical order pq left to right. Okay, and let's go ahead and just without numbers, we are going to use some terminology here that I've put in the middle. P₁ and Q₁. When we use this P₁ and Q₁ that means that's the original situation, and then P₂ and Q₂ is what happened after we made the change. So let me show you on the graph what I mean by that. So let's say we started here on the graph, it's red, at this point right here where we demanded quantity Q₁ at a price of P₁, right? Whatever price that was and whatever quantity that was. We're going to do a lot of our analysis like this without numbers. So we started at that price, but let's say the price increased here to P₂. Nothing else changed. Remember ceteris paribus, nothing changed here except the price. So what's gonna happen? We're at this new price here, and this new quantity here, right. We didn't draw a new demand curve. All that happened was there was this decrease in quantity demanded. So the quantity demanded decreased because the price increased right. So this is a distinction that we're trying to make and I'm trying to make clear to you right now that there's going to be a difference when we have a change in price rather than a change in one of these other determinants and we're going to discuss every determinant in detail coming up. But as an example, let's say consumer income changed or even easier preferences. Let's say that consumers prefer this good now, they rather have this good to something else We're going to discuss that in more detail, but let's say they want this good more, we're going to shift this graph to the right. Okay, we're gonna have this new notice I drew a new demand curve here and this is an increase in let me do it. Yeah, I like this. It's gonna have this one in blue and the other one in red. So this is an increase in an increase in demand, not an increase in quantity demanded because notice the price isn't what's changing here. Something else other than price is changing. So let's say we were at this price right here. Again, let's label our axis p and q. We were at this price P₁ and we were at this quantity demanded P₁. And notice, the price didn't change here. But what happened is now or excuse me. At the same price, our quantity demanded is much higher. Right? So over here, on the left hand side, we had a change in the price and a change in the quantity demanded, right? Here notice the price stayed the same but the quantity demanded went way up at that price. You understand? So it's because we have a new demand curve that we drew. So we had here, we'll call this D₁ for the first demand curve and D₂ for the second demand curve. Right, so notice in this situation we drew a new curve, so it's an increase or decrease in demand. Kids get this wrong all the time, right. This is a huge confusion point for a lot of students so just take a second to hammer this in and you might even want to come back to this lesson after you understand all the changes in demand, but I did want to point this out first just so you have it in your head. And I have this point at the bottom here all else equal, all else not equal, right. So here in the change in price, everything else is staying the same. The only thing that's changing is price, right? And we're affecting our quantity demanded here. I just wanted to make a point that we are still holding our ceteris paribus conditions even on the right where I have all else not equal, the idea is everything else is staying equal except this one thing that's changing. We're still holding everything else equal. So ceteris paribus still holds in this case, there's just one thing that's changing such as the income of the consumer or the preferences of the consumer, something like that. Cool?

Alright, so I'm going to end this video right now and then we will continue on the bottom of the page. Let's do it.

Here’s what students ask on this topic:

What causes a movement along the demand curve?

A movement along the demand curve is caused solely by a change in the price of the good or service. When the price increases, the quantity demanded decreases, and when the price decreases, the quantity demanded increases. This relationship is depicted as a movement from one point to another on the same demand curve, holding all other factors constant (ceteris paribus). This is different from a shift in the demand curve, which is caused by changes in other determinants like consumer income, preferences, or the prices of related goods.

How does a change in price affect quantity demanded?

A change in price affects the quantity demanded by causing a movement along the demand curve. If the price of a good increases, the quantity demanded decreases, and if the price decreases, the quantity demanded increases. This inverse relationship between price and quantity demanded is known as the law of demand. The demand curve itself does not shift; instead, the movement is along the curve from one point to another, reflecting the new quantity demanded at the new price.

What is the difference between a movement along the demand curve and a shift in the demand curve?

A movement along the demand curve occurs when there is a change in the price of the good or service, leading to a change in the quantity demanded. This is represented by moving from one point to another on the same demand curve. In contrast, a shift in the demand curve happens when there is a change in other determinants of demand, such as consumer income, preferences, or the prices of related goods. A shift indicates a change in demand at every price level, resulting in a new demand curve either to the right (increase in demand) or to the left (decrease in demand).

What are the determinants of demand that can cause the demand curve to shift?

The determinants of demand that can cause the demand curve to shift include changes in consumer income, consumer preferences, the prices of related goods (substitutes and complements), expectations of future prices, and the number of buyers in the market. For example, an increase in consumer income can lead to an increase in demand, shifting the demand curve to the right. Similarly, if a good becomes more popular, consumer preferences can increase demand, also shifting the curve to the right.

Why does a change in price not shift the demand curve?

A change in price does not shift the demand curve because the demand curve already represents the relationship between price and quantity demanded. When the price changes, it results in a movement along the existing demand curve rather than creating a new curve. Shifts in the demand curve are caused by changes in other factors, such as consumer income, preferences, or the prices of related goods, which affect demand at all price levels, not just the current price.