Shifts in demand

A change in the position of a demand curve indicates a change in the 'underlying determinants' of demand rather than a change in price.

A demand curve can shift to the right (at D1) - an increase - or to the left (at D2) - a decrease following a change in an underlying determinant of demand. With an increase, more goods are demanded at all prices.

Increase in demand

Shifts in demand
Shifts in demand

Decrease in demand

Shifts in demand
Shifts in demand

Several factors can cause a shift in a demand curve, including:

  1. Changes in incomes - if we assume goods are 'normal' goods, then higher incomes will enable consumers to purchase more products, whatever the price - so the demand curve will shift to the right. Falling incomes will shift the demand curve to the left.
  2. Changes in the price of substitutes will also affect demand, with a fall in the price of a substitute leading to a shift of demand to the left, and a rise in the price of a substitute causing demand to shift to the right.
  3. Changes in the price of related products, such as complements, will also shift the demand curve. For example, a rise in the price air travel may lead to a fall in the demand for overseas holidays.
  4. Changes in consumer's tastes and preferences will also affect demand. The demand for gym memberships has increased as more people to improve their levels of health.
  5. Demand can also be influence by changes in the nature of the population - such as when a population ages - and changes in natural factors, such as changes in weather causing changing in the type of clothing demanded.
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