Movement along Demand Curve and Shift in Demand Curve
Movement along Demand Curve:
Movement along a demand curve is a graphical representation of change in quantity demanded due to change in price, other things remaining the same. An increase in quantity demanded due to a decrease in price is called expansion in demand. A decrease in quantity demanded due to a rise in price is called a contraction in demand. It can be further explained with the help of the following figure;
In the above figure, quantity demanded is measured along the x-axis, and the price is measured along the y-axis respectively. Here, OP is the initial price and OM is the initial quantity demanded. When the price falls from OP to OP’, then the quantity demanded increases from OM to ON, which is called expansion in demand. When the price increases from OP to OP”, then the quantity demanded falls from OM to OL, which is called contraction in demand.
Shifts in Demand:
The shift in the demand curve is a graphical representation of changes in demand due to changes in determinants of demand other than price. A rightward shift in demand is called the increase in demand. A leftward shift in demand is called a decrease in demand. It can be further explained with the help of the following figure;
In the above figure, demand is measured along the x-axis, and the price is measured along the y-axis respectively. In the figure, an increase in demand from OQ to OQ1 is called the rightward shift. A decrease in demand from OQ to OQ2 is called a leftward shift.
Causes for Leftward Shift:
- Decrease in income.
- Decrease in price of substitute goods
- Decrease in the number of the consumer.
- The expectation of a fall in price.
- Decrease in the advertisement.
- Decrease in taste and preference of the consumer.
- Unfavorable weather conditions.
- Increase in the tax rate.
Causes for Rightward Shift:
- Increase in income.
- Increase in price of substitute goods.
- Expect of rising in price.
- Increase in the number of consumers.
- Increase in the advertisement.
- Increase in taste and preference of the consumer.
- Favorable weather condition.
- Decrease in the tax rate.
