Shift In Demand Curves | 4 mins read

What Creates Shift in Demand Curves?

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Cynthia Vespia

By Cynthia Vespia

Which Factors Cause Shift in Demand Curves?

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Price, consumer interest, and supply are each factors that affect demand. These factors are further influences by a consumers ability to purchase. In other words, they might desire to buy the product but their income isn't at a level to do so. Therefore, pricing is changed to meet consumer needs. This more affordable option will change demand and ultimately causes movement along a specific demand curve happens.

When a demand curve shifts, the quantity demanded by individual buyers doesn't round out to the same amount. Essentially, a shift in a demand curve looks at the market as a whole and establishes patterns.

Normal and inferior goods
There are many other factors that influence shifts in demand curves. When a product demand rises as income rises it's called a normal good. As incomes rise, choices may shift to high-end retail items.

If demand for a product falls when income rises it's labeled and inferior good. Meaning that with income increases, the demand curve for an inferior good will shift left of the equilibrium price on the center line.

Changing tastes or preferences
Changes in taste can change the demand for a product. For example, consumption of chicken by Americans rose from the 1980s into the mid-2000s. In those years, American were eating around 85 pounds of chicken per year.

However, consumption of beef fell to 54 pounds per year from 77 pounds the year before. This changes the quantity demand at every price and will shift the demand curve. The rise in chicken consumption would shift it right and the lower consumption of beef would shift the curve left.

Related goods

Related products see in uptick in demand when their counterpart is reduced in price. These are products that enhance the quality or use of the original product in question. This is often seen with electronics. Or, if a lower price is offered for a product that can be used in substitution, the price change decreases demand for the other product.

For example, when DVDs came out it changed the quantity demanded for VHS tapes. Now, DVDs have essentially been replaced by streaming services and online libraries which has decreased their demand. This is representative of a leftward shift in the demand curve.

  • Price of related goods
  • Changes in tastes or preferences
  • Changes in income
  • Normal and inferior goods

Impact of Demand Curve Shift

Whenever a shift is made to the supply or demand curve it directly affects the market equilibrium.
If a change occurs with one of the demand factors it is reflected with a change to the demand curve. For instance, if a the pricing of the product changes or consumer preference shifts. Those demand factors would make a curve change.

When demand for goods increases movement along demand curve it will shift to the right. This higher quantity demand can increase price on the popular product.

On the other hand, if a lower quantity is being consumed it can shift the supply curve to the left away from the price equilibrium. This happens when consumers lose interest in the product or find similar products at a lower price.
How does a shift in demand impact the supply curve?
When a demand curve shifts up it moves the supply curve as well. This shift will raise the equilibrium price and quantity. If by chance new oil is discovered it will increase the quantity of oil available. This shifts the supply curve to the right which decreases the equilibrium price but increases equilibrium quantity. When oil sources are low, the opposite is true where the demand outreaches the supply and then shifts are made left across the spectrum.

Shifts in Demand and Supply
The market equilibrium cannot truly be gauged due to the constant flux of the market place. To understand the nuances involved with shifts to supply and demand, detailed information is needed on the factors that institute change to the new market equilibrium.

If both supply and demand increases for a product in the marketplace it shifts the price equilibrium right. Quantity raises if a demand is high enough but will decrease when it's not. Similarly, if the supply curves shift left it pertains to a quantity reduction with an uncertain price quantity demanded.

When the supply and demand curves shift in opposite directions, the price remains certain but not the quantity. If income increase creates a rush on products the demand curve shifts to the right while the supply curve shifts left. For demand price to be raised or lowered, it would take a magnitude changes within the supply and demand curves.

Conclusion to Demand Curve

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  • Demand curves can shift from changes in income, preferences, or pricing.
  • If the demand curve shifts right or left it will affect the market equilibrium.
  • Factors that shift a demand curve left or right will directly affect supply and demand and the market equilibrium.
  • Shifts in the demand curve must consider the product's place in the market as a whole.