Demand Shifts vs. Movements Along the Demand Curve
When economists say “demand changes,” they might mean two different things: a shift of the entire demand curve or a movement along a given demand curve. This chapter focuses on non-price determinants that shift demand.
- Movement along the curve: caused by a change in the good’s own price (quantity demanded changes).
- Shift of the curve: caused by a change in something other than the good’s own price (demand changes at every price).
Common confusion
“Demand increased because the price fell.” A price fall does not increase demand; it increases quantity demanded (movement along the curve). Demand increases only when a non-price determinant changes.
A Rule-Based Method for Any Demand Shifter
Use this consistent four-step method each time:
- Name the determinant that changed (income, tastes, related goods, expectations, number of buyers).
- Give a concrete example in plain language.
- State the direction of shift: demand curve shifts right (increase in demand) or left (decrease in demand).
- Connect to the graph: “At every price, buyers now want more/less than before.”
1) Income
Income affects demand differently depending on whether the good is normal or inferior.
Income and Normal Goods
(1) Determinant: Income
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(2) Example: After getting a raise, a household buys more fresh salmon each week.
(3) Direction of shift: Demand for salmon shifts right (increases).
(4) Graph connection: At every possible price of salmon, the household (and many like it) is willing and able to buy more, so the entire demand curve moves right.
Income and Inferior Goods
(1) Determinant: Income
(2) Example: When incomes rise, some commuters stop taking the bus and start using ride-hailing or buying a car; they buy fewer bus rides.
(3) Direction of shift: Demand for bus rides shifts left (decreases).
(4) Graph connection: At every bus-fare price, fewer rides are demanded than before, so the demand curve shifts left.
Common confusion
Inferior does not mean “low quality.” It means demand falls when income rises (and rises when income falls).
Mini-exercise: Shift or movement?
- A city raises bus fares from $2 to $2.50, and ridership falls. Is this a shift or a movement along the curve?
- Unemployment rises and more people choose the bus instead of ride-hailing. Is this a shift or a movement along the curve?
Check
- Fare increase: movement along the demand curve for bus rides (own price changed).
- Unemployment/income drop: shift right in demand for bus rides (income changed; bus rides behave as an inferior good in this example).
2) Tastes and Preferences
(1) Determinant: Tastes/preferences (including trends, health concerns, advertising, social influence)
(2) Example: A popular documentary convinces many consumers that reusable water bottles are healthier and more environmentally friendly, increasing their preference for them.
(3) Direction of shift: Demand for reusable bottles shifts right.
(4) Graph connection: At every price, more bottles are desired because preferences changed, not the bottle’s price.
Common confusion
If the price of reusable bottles falls, that is a movement along demand. If people like reusable bottles more (for any reason), that is a shift.
Mini-exercise: Shift or movement?
- A celebrity endorses oat milk, and more people buy it at every price. Shift or movement?
- The price of oat milk drops by $1 and sales rise. Shift or movement?
Check
- Celebrity endorsement: shift right (tastes/preferences).
- Price drop: movement along the demand curve (own price).
3) Prices of Related Goods: Substitutes and Complements
3A) Substitutes
Substitutes are goods that can replace each other in consumption (buyers switch between them).
(1) Determinant: Price of a substitute
(2) Example: The price of coffee rises. Some people switch to tea.
(3) Direction of shift: Demand for tea shifts right.
(4) Graph connection: At every price of tea, more tea is demanded because coffee became relatively less attractive.
Reverse the story to practice: if the price of coffee falls, demand for tea tends to shift left.
Common confusion
When the price of coffee rises, the demand curve that shifts is tea’s (the related good), not coffee’s. Coffee’s price change causes a movement along coffee’s own demand curve.
3B) Complements
Complements are goods that are used together.
(1) Determinant: Price of a complement
(2) Example: The price of printers falls. More people buy printers, and they also buy more ink cartridges.
(3) Direction of shift: Demand for ink cartridges shifts right.
(4) Graph connection: At every price of ink, more ink is demanded because printer ownership/use increases when printers are cheaper.
Reverse the story: if printers become more expensive, demand for ink tends to shift left.
Mini-exercise: Identify the shifter and the direction
- The price of streaming subscriptions rises, and more people buy DVDs. What happens to demand for DVDs?
- The price of smartphones falls, and more people buy phone cases. What happens to demand for phone cases?
Check
- DVDs are substitutes for streaming: demand for DVDs shifts right.
- Phone cases are complements to smartphones: demand for cases shifts right.
4) Expectations About the Future
Expectations about future prices, income, or availability can change current demand.
(1) Determinant: Expectations
(2) Example: Consumers expect gasoline prices to rise next month, so they fill up more often this week.
(3) Direction of shift: Current demand for gasoline shifts right.
(4) Graph connection: At every current price, buyers want more now because they anticipate higher future prices.
Expectations can also reduce current demand:
- If consumers expect a big discount on laptops next month, some delay purchases now, shifting current demand for laptops left.
Common confusion
Expectations can shift demand even if today’s price hasn’t changed. The key is that buyers change their willingness to buy today based on what they think will happen later.
Mini-exercise: Shift or movement?
- Rumors spread that a game console will be out of stock soon; people buy consoles immediately. Shift or movement?
- The console’s price increases by $50 and sales fall. Shift or movement?
Check
- Rumors/expectations: shift right (current demand increases).
- Price increase: movement along the demand curve.
5) Number of Buyers
Market demand depends on how many buyers are in the market (population, demographics, access).
(1) Determinant: Number of buyers
(2) Example: A new university opens in a town, bringing 10,000 students who rent apartments.
(3) Direction of shift: Demand for rental housing shifts right.
(4) Graph connection: At every rent level, more units are demanded because there are more renters.
The opposite can occur:
- If a factory closes and many residents move away, demand for local restaurant meals may shift left.
Common confusion
“More buyers” shifts demand even if each individual buyer’s preferences and income stay the same. It is a change in the size of the market, not a change in the good’s price.
Mini-exercise: Identify shift direction
- A city’s population grows rapidly due to migration. What happens to demand for public transit rides?
- A neighborhood loses residents after a major employer relocates. What happens to demand for local gym memberships?
Check
- More residents: demand shifts right.
- Fewer residents: demand shifts left.
Quick Reference Table: Determinants That Shift Demand
| Determinant | What changes? | Typical effect on demand | Key reminder |
|---|---|---|---|
| Income | Buyer purchasing power | Normal: income ↑ → demand ↑ (right); Inferior: income ↑ → demand ↓ (left) | Classify the good first |
| Tastes/preferences | Desire for the good | More favorable tastes → right; less favorable → left | Not the same as a price change |
| Price of substitutes | Price of alternative goods | Substitute price ↑ → demand for this good ↑ (right) | Related good’s price shifts your curve |
| Price of complements | Price of jointly used goods | Complement price ↑ → demand for this good ↓ (left) | Think “used together” |
| Expectations | Beliefs about future prices/income/availability | Expect higher future price/shortage → current demand right; expect future sale → current demand left | Changes buying timing |
| Number of buyers | Market size | More buyers → right; fewer buyers → left | Market demand sums individuals |
Practice Set: Shift or Movement Along?
Decide whether each situation causes (A) a shift in demand or (B) a movement along the demand curve. If it is a shift, state left or right.
- The price of movie tickets rises, and fewer tickets are purchased.
- People become more health-conscious and buy more salads at every price.
- Wages fall during a recession, and more households buy instant noodles.
- The price of butter rises, and fewer people buy toast (bread) for breakfast.
- Consumers expect electric vehicle prices to drop next year, so they delay purchases today.
Check
- Ticket price rises: movement along.
- Health-conscious tastes: shift right for salads.
- Wages fall; instant noodles (inferior good example): shift right.
- Butter and toast are complements: butter price ↑ → demand for bread/toast shifts left.
- Expect future EV price drop: current demand for EVs shifts left.
