Supply And Demand - Chapter 3 Page 13
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Part I: Preliminaries
4
P
F I G U R E
A
P
The Demand Curve—
1
A Summary
B
P
⇒
2
price↓
move rightward along curve
Q
Q
Q
1
2
P
B
P
⇒
2
price↑
move leftward along curve
A
P
1
Q
Q
Q
2
1
• income or wealth↑
• price of substitute↑
P
• price of complement↓
⇒
• population↑
demand curve shifts rightward
• expected price↑
• Tastes shift
D
D
toward good
1
2
Q
• income or wealth↓
P
• price of substitute↓
• price of complement↑
⇒
• population↓
demand curve shifts leftward
• expected price↓
• Tastes shift
D
D
2
1
away from good
Q
D
: A S
EMAND
UMMARY
Figure 4 summarizes the variables we’ve discussed that affect the demand side of
the market and how their effects are represented with a demand curve. Notice the
important distinction between
Does Supply Affect Demand?
A troubling thought may have
movements along the demand
occurred to you. Among the variables that shift the demand curve
curve and shifts of the entire curve.
in Figure 3, shouldn’t we include the amount of syrup avail-
Keep in mind that other
DANGEROUS
able? Or to put the question another way, doesn’t supply
variables, besides those listed in
CURVES
influence demand?
Figure 4, can influence demand.
No—at least not directly. The demand curve by asking people
For example, government subsi-
a series of hypothetical questions about how much they would like
dies such as Federal Pell Grants for
to buy at each different price. A change in the amount available would
college shift the demand curve for
not affect the answers to these questions, and so doesn’t affect the curve itself,
higher education rightward. Expec-
As you’ll see later, a change in supply will change the price of the good, but this
tations other than future price
causes a movement along—not a shift of—the demand curve.
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