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Exercises · Q10

Q.Distinguish between a movement along the demand curve and a shift of the demand curve, giving one cause and one diagram-effect for each.

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Movement along the demand curve (also called a change in quantity demanded) occurs ONLY when the price of the good ITSELF changes, with every other determinant (income, tastes, related-goods' prices, etc.) held constant. The demand curve itself stays exactly where it is — the consumer simply moves to a DIFFERENT POINT on the SAME curve.

  • Cause: a fall in the good's own price.
  • Diagram effect: the point representing the price-quantity combination slides DOWN and to the RIGHT along the unchanged curve (this specific case is called an "expansion of demand"); a price rise causes the opposite movement, up and to the left (a "contraction of demand").

Shift of the demand curve (also called a change in demand) occurs when any determinant OTHER than the good's own price changes. The ENTIRE demand curve moves to a NEW position, so that at the very SAME price, a different quantity is now demanded than before.

  • Cause: a rise in the consumer's income (for a normal good). …

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