Demand shifts and movements
Distinguish a response to the good's own price from a change in demand at each price.
What you will learn
- Explain a movement along a demand curve.
- Predict the effect of income on a normal good.
Own-price changes move along a curve
A demand curve relates quantity demanded to the good's own price, holding other influences constant. A change in that price causes movement along the existing curve. A lower price normally increases quantity demanded, other things equal.
A change in another determinant, such as income, preferences or the price of a related good, can shift the whole curve.
State the type of good
For a normal good, higher income increases demand at a given price, shifting the curve right. For an inferior good, the relationship with income is reversed. The words normal and inferior describe this relationship, not moral value or product quality.
A full explanation names the changing determinant, holds the own price constant and states the direction of the shift.
Worked example
Household incomes rise while the price of a normal good stays unchanged. Explain the diagram change.
Show the worked solution
- The changing variable is income, not the good's own price.
- Consumers demand more of a normal good at each price.
- The demand curve shifts to the right.
Answer A rightward shift in demand
Common mistakes
- Do not call a shift a movement along the curve.
- Higher income does not increase demand for every type of good.
What can you explain now?
What happens when only the good's own price falls, other things equal?
Compare with the explanation
Movement down the existing demand curve
The change is in quantity demanded along a fixed price–quantity relationship.
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