blanchard_ch03

# A point on the demand curve shows the quantity

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Unformatted text preview: emand curve shows the quantity demanded at a given price. So a movement along the demand curve shows a change in the quantity demanded. The entire demand curve shows demand. So a shift of the demand curve shows a change in demand. Figure 3.3 illustrates these distinctions. 59 A Change in the Quantity Demanded Versus a Change in Demand Price FIGURE 3.3 Decrease in quantity demanded Movement Along the Demand Curve If the price of the good changes but no other influence on buying plans changes, we illustrate the effect as a movement along the demand curve. A fall in the price of a good increases the quantity demanded of it. In Fig. 3.3, we illustrate the effect of a fall in price as a movement down along the demand curve D0. A rise in the price of a good decreases the quantity demanded of it. In Fig. 3.3, we illustrate the effect of a rise in price as a movement up along the demand curve D0. A Shift of the Demand Curve If the price of a good remains constant but some other influence on buyers’ plans changes, there is a change in demand for that good. We illustrate a change in demand as a shift of the demand curve. For example, if more people work out at the gym, consumers buy more energy bars regardless of the price of a bar. That is what a rightward shift of the demand curve shows—more energy bars are demanded at each price. In Fig. 3.3, there is a change in demand and the demand curve shifts when any influence on buyers’ plans changes, other than the price of the good. Demand increases and the demand curve shifts rightward (to the red demand curve D1) if the price of a substitute rises, the price of a complement falls, the expected future price of the good rises, income increases (for a normal good), expected future income or credit increases, or the population increases. Demand decreases and the demand curve shifts leftward (to the red demand curve D2) if the price of a substitute falls, the price of a complement rises, the expected future price of the good falls, income decreases (for a normal good), expected future income or credit decreases, or the population decreases. (For an inferio...
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## This note was uploaded on 04/04/2012 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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