Monday, 25 May 2009

Difference between Movement and Shift Along Demand Curve

A movement along a demand curve occurs when the ONLY factor that changes is price. Because only price changes and price is the Y Axis, there is no physical need for any translation of the demand curve. To find out the level of demand for the new price, you simply draw a line along the price and where it intersects the demand curve would be level of demand.
The diagram above indicates how a movement along a demand curve is best illustrated in a diagram. It is just an arrow along the demand curve in the correct direction. As price increases the movement would be to the left, as price decreases the movement would be to the right.

If the quantity decreases it is known as contraction.
If the quantity increases it is known as expansion.

*assumption is that price is the only factor that changes* Ceteris Paribus

In this diagram the shift from demand curve D1 to demand curve D2 is represented by an actual translation across the plane. This particular diagram features an inward shift to the left, or a shrink in demand. An outward shift would be an increase in demand.

This shift is caused by any actual changes in the determinants of demand.

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