The economy continually keeps changing, and so does the Demand in the current market. Every business and even the industries keep a record of how this Demand changes. The factors affecting it cause fluctuations in the market. For better analysis and understanding, usually, a Demand Curve is created. However, what is a Demand Curve, and how does it help? Is there any difference between the movement and Shift along the Demand Curve? Let us have a better insight into what it exactly is.
What is the Demand Curve?
It is defined as the graphical representation between the Demand and price of commodities and how the graph transforms with a change in their values. The Demand Curve comes as a result of the law of Demand and the law of supply.
According to the law of Demand, with increases in prices, the Demand decreases. If put in mathematical terms, Demand is an inverse of prices.
According to the law of supply, with an increase in prices, the quantity supply also increases.
Both these laws help in understanding the interaction of market prices with the Demand for goods and their supply. It is not just the price and quantity that affect the Demand Curve but there are also several other impactful factors.
Movement and Shift along the Demand Curve
For all the supplies that a company provides, there are changes in the Demand Curves; but based on what factors does this happen? You can expect the changes in the Demand Curve based on the following two factors.
This leads to the movement and Shift along the Demand Curve. What is the difference between the two? How does it affect the Curve?
Movement in the Demand Curve
Are you wondering what causes a movement along the Demand Curve?
Movement along the Demand Curve happens because of the change in the price of commodities. This further affects the quantity Demanded. All other factors remain unchanged. Under such a scenario, the graph moves along the Y-axis, as the price is plotted against it. At the same time, the other axis remains constant.
So, in such a scenario, with an increase in price, the Demand decreases, and with a decrease in price, the Demand increases.
The movement happens in a contraction and expansion format. Consider the following example.
Contraction of the Curve: For instance, if the price increases from 10to12 for a commodity, then the supply decreases from 100 to 80. This is called a contraction of the Demand Curve.
Expansion of the Curve: For instance, if the price decreases from 10to8 for a commodity, then the supply increases from 100 to 120. This is called an expansion of the Demand Curve.
There is no Shift in the position of the Curve, just an increase or decrease in the slope.
Then, what causes a Shift in the Demand Curve?
Shift in the Demand Curve
This happens when there is a change in any other factor apart from the price. It could be due to the quantity, consumer income, or several other factors on which the Demand Curve is based. Under this, even the price can vary. This leads to left or right Shift in the Demand Curve.
The factors leading to a Shift in the Curve are as follows.
It leads to a Shift in the Demand Curve, depending on the factors.
A movement and Shift can also occur in the same Curve over a longer time period. Initially, an increase in price for a certain commodity could lead to a movement in the Curve. However, with time, it could lead to a Shift in the same Curve, depending on other factors.
In economics, Demand refers to a customer's willingness and capacity to buy a product or service. It is the driving force behind economic progress and growth. No company would bother to produce anything if there was no Demand.
The link between quantity required and price is governed by the law of Demand. This economic principle explains something you probably already know intuitively. When prices rise, people buy less. It's also true the other way around. People buy more when the price falls.
The Demand Curve is an economics line graph that depicts how many units of an item or service will be purchased at different pricing. On the vertical (Y) axis, the price is represented, while the quantity is plotted on the horizontal (X) axis.
Demand Curves are used to determine the relationship between price and quantity, and they are based on the law of Demand, which asserts that as the price rises, the amount desired decreases. Furthermore, Demand Curves are frequently paired with supply Curves to estimate the market's equilibrium price and quantity.
Movement in Demand Curve
The movement of the quantity Demanded along the same Curve occurs when the quantity wanted of a given commodity changes due to a change in price while all other parameters stay constant.
The crucial thing to remember is that other elements such as the consumer's income and preferences, as well as the pricing of other commodities, remain constant, whereas only the price of the commodity fluctuates.
The change in price influences the quantity Demanded in this case, but the Demand Curve remains the same as before the price changes. The Demand Curve is moving. Along the Demand Curve, the movement might be either upward or downward.
The Shift of the Demand Curve
The Demand Curve Shifts when the amount required of a particular commodity changes at each feasible price due to a change in one or more other parameters. Other elements, such as the consumer's income and tastes, as well as the prices of other commodities, which were expected to remain constant, changed.
In this case, the quantity Demanded is affected by a change in price as well as a change in one or more other parameters. As a result, for each price adjustment, Demand follows a distinct Curve.
This is known as the Demand Curve Shift. Depending on the forces influencing it, the Demand Curve might Shift to the left or right.