So demanding. (Chapter 2 Q&A)
09/09/2012 § Leave a comment
#1 (and a little bit of #3) Explain the difference between a movement along the demand curve and a shift in the demand curve.
Demand is defined as the quantity, or how much, of a good or service a consumer is willing and able to buy at a certain point in time. The demand curve gives a visual representation of how much of a good or service is demanded at a certain price.
A movement on the demand curve is caused by a change in the price of the good or service (which we will, for this blog, call gervice). For example, if the price of apples at the supermarket is bumped up from, say, ¥100 to ¥150 yen, we can see demand for apples fall through the movement along the line of the demand graph. The change of price affects the demand of a gervice and is represented by a movement along the line of a demand curve. See below for an example of a movement on the demand curve.
A shift on the demand curve occurs when non-price factors kick into the mix and increases the demand for the gervices – this changes the quantity demanded at each price, which means that the entire line (that represents quantity demanded at each price) will have to move. This is a shift of the entire curve and not just movement along the line. Let’s say for example that now that it’s fall, apples are now in season (I don’t know, do apples get “in season” during Fall or what? Just work with me here.) and farmers and fruit-pickers have a generally larger supply of apples they can give supermarkets. Since it’s fall and it’s the season for apple pies and all things apple-y, consumers will demand for more apples at every price than they do during, say, spring or summer. Since they demand more apples at every price, the entire curve line shifts to the right, showing more quantity demanded at each price. See below for an example of a shift in the demand curve.
Note: Movements and shifts are basically the same in a supply curve as well. A change in the price of a gervice alters the amount a producer or firm will supply. If the price of a gervice increases, the quantity a producer will be willing to supply increases as well (an increase on the x-axis) and we can see movement along the line of the supply curve. The price of a gervice directly affects the quantity supplied and this is represented by movement along the curve’s line. A shift is when a non-price factor changes and affects everything – for example, if a clothes company slowly shifts from manual human labour to more efficient means via machinery and tools, the amount produced increases and the producers are then able to supply more at every price. Since they can supply more at every price, then the entire supply curve (which represents the quantities of a gervice that are supplied at every price) will shift to either the left or the right. Movements are affected by the price and only occur along the line of the graph. Shifts are when the entire graph moves.