Shifts In The Demand Curve

Suppose that the American Medical Association suddenly announces a new discovery: People who regularly eat ice cream live longer, healthier lives. How does this announcement affect the market for ice cream? The discovery changes people's tastes and raises the demand for ice cream. At any given price, buyers now want to purchase a larger quantity of ice cream, and the demand curve for ice cream shifts to the right.

Whenever any determinant of demand changes, other than the good's price, the demand curve shifts. As Figure 4-3 shows, any change that increases the quantity demanded at every price shifts the demand curve to the right. Similarly, any change that reduces the quantity demanded at every price shifts the demand curve to the left.

Table 4-3 lists the variables that determine the quantity demanded in a market and how a change in the variable affects the demand curve. Notice that price plays a special role in this table. Because price is on the vertical axis when we graph a demand curve, a change in price does not shift the curve but represents a movement along it. By contrast, when there is a change in income, the prices of related goods, tastes, expectations, or the number of buyers, the quantity demanded at each price changes; this is represented by a shift in the demand curve.

Figure 4-3

Shifts in the Demand Curve. Any change that raises the quantity that buyers wish to purchase at a given price shifts the demand curve to the right. Any change that lowers the quantity that buyers wish to purchase at a given price shifts the demand curve to the left.

Price of Ice-Cream Cone

Shifts The Demand Curve

Demand curve, D-

Quantity of Ice-Cream Cones

Demand curve, D-

Quantity of Ice-Cream Cones

Variables That Affect Quantity Demanded

Price Income

Prices of related goods Tastes

Expectations Number of buyers

Represents a movement along the demand curve

Shifts the demand curve

Shifts the demand curve

Shifts the demand curve

Shifts the demand curve

Shifts the demand curve

In summary, the demand curve shows what happens to the quantity demanded of a good when its price varies, holding constant all other determinants of quantity demanded. When one of these other determinants changes, the demand curve shifts.

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