Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

Tuesday, 3 January 2012

Change in Quantity Demanded (movement) and Change in Demand (Shift)

Change in Quantity Demanded (Movement)

   i.            Situation
Movement along the demand curve

 ii.            Factor
Occurs when price of a product changes
(own price of the product)
Others factors remain constant

iii.            Evidence
·   Upward movement
Decrease in quantity demanded (contraction)
Example; from B to A
·   Downward movement
Increase in quantity demanded
Example; form B to A

Change in Demanded (Shift)

  i.            Situation
Shift in the demand curve (new curve)

 ii.            Factor
Occurs when there are changes in other factors such as population, income, price of related goods, etc.
Price of the product remains constant

iii.            Evidence
Increase or decrease in demand curve

·   Demand curve shift to right (increase) if;
D0 → D1
1.    Price of substitutes goods increases
2.    Price of complement goods decrease
3.    Income increases (Normal Goods)
4.    Expected future price increases
5.    Number of buyers increase

·   Demand curve shift to left (decrease) if;
D0 → D2
  • Price of substitutes goods decreases
  • Price of complement goods increase
  • Income decreases (Normal Goods)
  • Expected future price decreases
  • number of buyers decrease