Shift in Demand

Shift in Demand:

The ‘other things’ which affect demand is also termed as determinants of demand. They comprise income of the consumer, prices of substitutes, tastes, and many more. Modifications in such determinants will modify demand independently of price. When income of consumer rises, they will purchase more irrespective of the price. Likewise a fall in income will bring a fall in demand even when there is no modification in price.

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Figure: Shifts in Demand Curve

In figure above, D is the unique demand curve with equilibrium price P and quantity Q. Any modification in the determinants of demand such as income and tastes will shift the demand curve. For illustration, a fall in the income of consumer shifts the demand curve D to D1 and the latest equilibrium would be at point E1.

Likewise, any rise in income shifts the demand curve from D to D2. The equilibrium too moves from point E1 to E2.

Note the distinction among changes in quantity demanded and change in demand. Changes in quantity demanded take place only whenever there is change in the price. Therefore the change in the price-quantity schedule brings movements on the demand curve while the changes in other determinants (viz., income, tastes, prices of substitutes, and so on) shift the demand curve as an entire.

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