Demand curve shift due to income
•Shift in demand curve takes place when there is a change in some factor, other than the price of the commodity.
•Given the prices of other goods and the preferences of a consumer, if the income increases, the demand for the good at each price changes, and hence, there is a shift in the demand curve.
•For normal goods, the demand curve shifts rightward and for inferior goods, the demand curve shifts leftward.
Shift Due to Price
•If there is an increase in the price of a substitute good, the demand curve shifts rightward.
•If there is an increase in the price of a complementary good, the demand curve shifts leftward
Shift due to a change in the tastes and preferences
•If the consumer’s preferences change in favour of a good, the demand curve for such a good shifts rightward.
•The demand curve shifts leftward due to an unfavourable change in the preferences
•The demand curve for ice-creams, is likely to shift rightward in the summer
•Revelation of the fact that cold-drinks might be injurious to health can adversely affect preferences for cold-drinks leading to a leftward shift
Demand Function and Demand Curve
•The amount of a good that the consumer chooses depends on
•the price of the good,
•the prices of other goods,
•income of the consumer and
•her tastes and preferences.
•The demand function is a relation between the amount of the good and its price when other things remain unchanged.
•The demand curve is a graphical representation of the demand function.
Movements along the Demand Curve and Shifts in the Demand Curve
•At higher prices, the demand is less, and at lower prices, the demand is more.
•Any change in the price leads to movements along the demand curve.
•Any changes in any of the other things lead to a shift in the demand curve.