What does a shift in the demand curve mean? In terms of price and quantity, what...

What does a shift in the demand curve
mean?
In terms of price and quantity, what is
the difference between if the shift
demand curve up and shift demand
curve down?

Expert Solution

Shift in demand curve occurs when there is change in demand by factors other then price of the good. Other factors means price of related goods, income of consumers, taste of consumers. When these factors changes the demand, there will be shift in demand curve. If demand is increased due to any factor (like increase in income) there will be upward shift of demand curve as shown in figure 1. Demand curve shifted from D0 to D1.

If there is decrease in demand due to any factor (other than price of good) there will be downward shift in demand curve.

When price of good changes the demand, it is called change in quantity demanded and there is movement on same demand curve.

2) Figure 2 showing shift in demand curve up. There will be increase in quantity and price when demand curve shifts up. Quantity increased from Q0 to Q1 and price increasedfrom P0 to P1.

3) When demand curve shifts down, as shown in figure 3, there is decreasein quantity and price. Equilibrium quantity decreased from Q2 to Q1 and price decreased from P0 to P1.

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Rahul Sunny answered 1 year ago

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