Question

The market is comprised of the forces of Supply and Demand. Free societies rely on the market to answer the fundamental questions: what, how, and whom? The market is like a pair of scissors that need both supply and demand to set prices people pay for goods and services. It is a natural order that works with nobody in control. There are supply and demand schedules as well as supply and demand curves. The supply curve is a graph of the supply schedule, and the demand curve graphs the demand schedule. At a price where quantity supplied equals quantity demanded, there is an equilibrium price and quantity. The price for a good or service remains at the equilibrium price until some factors shift the demand or supply curve.

With the above information, state the difference between “change in quantity demanded” versus a “change in demand,” and list the factor(s) that cause(s) change in quantity demanded and change in demand.

Answer 1

Answer

A change in demand refers to a shift in the entire demand curve, which is caused by a variety of factors (preferences, income, prices of substitutes and complements, expectations, population, etc.). In this case, the entire demand curve moves left or right.

Figure 1. Change in Demand. A change in demand means that the entire demand curve shifts either left or right. The initial demand curve D₀ shifts to become either D₁ or D₂. This could be caused by a shift in tastes, changes in population, changes in income, prices of substitute or complement goods, or changes future expectations.

A change in quantity demanded refers to a movement along the demand curve, which is caused only by a change in price. In this case, the demand curve doesn’t move; rather, we move along the existing demand curve.

Factors affecting demand: Preferences, income, prices of substitutes and complements, expectations, population, etc.

Factors affecting quantity demanded: Price only