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Understanding what a demand curve is vital in the study of Economics. The quantity of a product or service that a buyer is willing to buy at different prices throughout time is defined as demand. Sometimes consumers want to buy more at the same price. This is known as a shift in demand. Following a price change, there is a movement along the demand curve.
Most economics students struggle to understand the difference between movement and shift in the demand curve. Read on to know more about the demand curve, movement along the demand curve, shift in the demand curve, and the difference between them.
What is a Demand Curve?
The demand curve graphically represents the relationship between the demand for a commodity and the price of that product at any given period. In addition, demand curves are frequently paired with supply curves to estimate the market’s equilibrium price and quantity.
In a graph, the vertical axis (Y-axis) represents the price of the commodity, while the horizontal axis represents the amount demanded (X-axis). The price of a commodity and its demand have an inverse relationship. This indicates that as the price of an item rises, so does its demand, and as the price falls, so does the demand. As a result, the demand curve in a graph has a downward slope.
Difference between a movement along the Demand Curve and a Shift in the Demand Curve
Every business has a demand curve for the commodities it sells. Many things influence demand, and these influences may be recognised by looking at variations in the demand curve. They are divided into two categories:
Change in demand
Change in the quantity demanded
Movement along the demand curve is caused by a change in the commodity’s price, whereas the shift is caused by a change in one or more factors other than the price. There is a change along the curve with movement in the demand curve. However, in the shift in the demand curve, there is a change in the position of the curve.
Movement along the Demand Curve
The change in both factors, namely the price and quantity demanded, from one point to the next is depicted by movement along the demand curve. There are two forms of movement in a demand curve: extension and contraction.
When the demand for a commodity rises due to a decrease in price, the demand curve extends. A contraction in the demand curve occurs when the demand for a commodity diminishes due to a price increase.
If the quantity changes due to the fluctuation in the price of the product or service, the demand curve moves. Any of the two directions of movement along the curve are possible:
Upward Movement indicates a decrease in demand, i.e., a decrease in demand due to a price increase.
Downward Movement indicates an increase in demand, i.e., demand for the product or service rises as prices decrease.
As a result, when prices are low, more of a good is demanded, whereas when prices are high, less quantity is demanded.
A Shift in the Demand Curve
A shift in the demand curve shows changes in demand at each potential price due to changes in one or more non-price factors like the price of comparable commodities, income, taste and preferences, and consumer expectations. If there is a shift in the demand curve, the equilibrium point also shifts. Any of the two sides of the demand curve shifts:
Rightward Shift denotes a rise in demand at the same price due to a favourable shift in non-price variables.
Leftward Shift: When the price remains constant, but other factors move unfavourably, this indicates a drop in demand.
Factors causing a Shift in the Demand Curve
The curve will shift to the right if consumers’ desire to buy increases. It will shift to the left if consumer willingness to buy declines. The following are the most prominent causes of demand curve shifts:
Price of Related Goods: An increase in demand for one product may impact demand for another. A rise in the price of pizzas, on the other hand, may stimulate demand for hamburgers.
Income: As customers’ incomes rise, so does their demand for things. On the other hand, as consumer earnings rise, demand for lower-quality goods will fall.
Numbers of Buyers: Changes in the composition of the population have an impact on the demand for specific items.
Expectations: Consumers’ future expectations influence their purchasing decisions.
Conclusion
To summarise, the demand curve is a graph that depicts the relationship between the price of a commodity or service and the quantity demanded over time. There is a movement along the demand curve when the quantity wanted of a single commodity changes due to a change in price, while all other factors remain constant. The demand curve shifts when the amount required of a particular commodity changes at each possible price due to a change in one or more other factors.
