Shifts in the Demand Curve -A-Level Economics
Factors which shift the demand curve
Changes in the price of substitutes or complementary goods
Substitute goods are goods which are easily interchangeable, and therefore the demand for one good is likely to rise if the price of the other good rises.
Complimentary goods are goods which tend to be bought to complement each other (e.g. bread and milk), and therefore an increase in price of one good causes the demand for the other good to fall.
Changes in real income
As income increases, people have more money to spend on a good, and therefore normally demand goes up. Therefore, for normal goods, a change in income causes a shift in the demand curve and tastes.
Here, an increase in income has meant that consumers have more money to spend on beer, so demand increases and the curve shifts.
However, for some inferior goods, as income increases demand falls. This is due to the fact that inferior goods tend to be cheap alternatives which are replaced by higher quality goods when consumers have more money.
A normal good is one where the quantity demanded increases in response to an increase in consumer incomes.An inferior good is one where the quantity demanded decreases in response to an increase in consumer incomes.
Consumer Preferences
Factors such as the following affect consumer preferences:
- Good Advertising
- Celebrity Endorsement
- Health News
- Fashion
- Weather (e.g. ice cream is in greater demand in summer)
Population Level + Structure
A higher population tends to mean greater demand. A change in the average age of the population increases demand of certain goods, whilst decreases demand of others.
The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity of that good or service that consumers are willing and able to buy.
A shift in the demand curve occurs when there is a change in one of the factors that influence demand, such as income, preferences, or the price of related goods. This change causes the entire demand curve to shift either to the right (increase in demand) or to the left (decrease in demand).
When there is a shift in the demand curve, the equilibrium price and quantity will also change. If the demand curve shifts to the right, the equilibrium price and quantity will increase. If the demand curve shifts to the left, the equilibrium price and quantity will decrease.
A movement along the demand curve occurs when there is a change in the price of the good or service, resulting in a change in the quantity demanded. A shift in the demand curve occurs when there is a change in one of the factors that influence demand, causing the entire demand curve to shift.
Some factors that can cause a shift in the demand curve include changes in income, changes in preferences, changes in the price of related goods, changes in population, and changes in consumer expectations.
You can analyze shifts in the demand curve by examining how changes in the factors that influence demand affect the quantity of the good or service that is demanded. For example, if the price of a substitute good increases, you would expect the demand for the original good to increase as well.
Understanding shifts in the demand curve is important for A-Level Economics students because it is a key concept in microeconomics. It helps students to understand how changes in the market can affect the price and quantity of goods and services, and how consumers respond to these changes. This knowledge can be applied to real-world scenarios, making it a valuable skill for students to have.
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