10/22/2014CRC Economics1

10/22/2014CRC Economics2 Do you know … what a movement in a demand curve is and what causes it? what a shift in a demand curve is and what causes it?

10/22/2014CRC Economics3 The general demand function Quantity demanded depends on priceandincome / wealth Qd = f(P,other factors) tastes / preferences prices of other related goods (substitutes & complements) expectations number of buyers

10/22/2014CRC Economics4 A movement along the demand curve (change in Qd) If Qd changesdue to a change in P and other factors staying the same, Qd = f(P,other factors) If Qd changes PP  Qd then there is a movement along the demand curve. i.e.

10/22/2014CRC Economics5 A movement along the demand curve (  Qd) P QQ1Q1 Q2Q2  Qd P1P1 P2P2 PP a b D 1. If a change in Qd (  Qd) … 2. follows a change in P (  P), 3. there is a movement along the existing demand curve from one point to another.

10/22/2014CRC Economics6 A shift in the demand curve (change in demand) due to P being the same and a change in one of the other factors, Qd = f(P,other factors) If Qd changes  other factors  Qd then there is a shift in the demand curve. i.e.

10/22/2014CRC Economics7 A shift in the demand curve (  D) P QQ1Q1 Q2Q2  Qd P1P1 a D c D’ DD 1. If a change in Qd (  Qd) occurs … 2. without a change in P (  P = 0), 3. there is a shift the demand curve.

10/22/2014CRC Economics8 Summary Qd = f (P), other factors = constant (D)  P =>  Qd a movement along the existing demand curve  other factors =>  D a shift in the demand curve

10/22/2014CRC Economics9 Now you know … what a movement in a demand curve is and what causes it. what a shift in a demand curve is and what causes it.

10/22/2014CRC Economics10