Lesson 2.2: Demand Curve Shifts

Flashcards made from a presentation segment created as a lesson on demand curve shifts.

Demand curve shift

A change in the quantity demanded at any given price, represented by the movement of the original demand curve to a new position

Demand curve movement

A change in the quantity demanded, caused by a change in price

Decrease in demand

A situation where, at any given price, consumers demand a smaller quantity than before

• This results in a leftward shift of the demand curve

Increase in demand

A situation where, at any given price, consumers demand a larger quantity than before

• This results in a rightward shift of the demand curve

Demand curve shift factors

Represented by TRIBE, a mnemonic device:

• Taste changes

• Related goods and services price changes

• Income changes

• Buyer number changes

• Expectation changes

Taste changes

Changes or beliefs, culture, or current fads that shift the demand curve for a good or service

• Men’s hats became less popular after World War 2, causing the demand curve to shift to the left

• Hip-hop and alternative rock became more popular in the 1990s, causing the demand curve to shift to the right

Related goods and services price changes

Changes in the prices of a related good or service that shifts the demand curve depending on whether they are:

• substitutes (consumers flock to another product based on price) or

• complements (consumers buy a product with another product)

Substitutes

A pair of products where the increase in the price of one product causes people to demand more of the other

• Higher jeans prices cause people to buy more khakis

Complements

A pair of products where the decrease in the price of one product makes people buy more of the other

• Cookies and milk are often consumed together; lower cookie prices may result in more demand for milk

Income changes

Changes which can shift demand for a good differently depending on whether it is a:

• normal good (higher incomes result in higher demands), or an

• inferior good (higher incomes result in lower demands)

Normal good

A good where an increase in income raises the demand for a good (most goods)

• Higher incomes correlate with more real estate purchases

Inferior good

A good where an increase in income lowers the demand for a good (rarer)

• Higher incomes correlate with lower bus pass purchases as people opt for more expensive taxis

Buyer number changes

A situation where a change in the number of buyers or consumers shifts the demand curve

• A decrease in the number of consumers causes demand to shift left

• An increase in the number of consumers causes demand to shift right

Expectation changes

A situation where the expectation of rising prices in the future causes an increase in demand today

• Consumers who think computers will be more expensive next year may opt to buy them now, increasing the demand for computers today