Movement Along the Demand Curve vs Shift of the Demand Curve

A demand curve can change in two fundamentally different ways, and the Maharashtra HSC (MSBSHSE) Economics syllabus treats the distinction between them as one of the most important ideas in this chapter.

Movement along the demand curve happens when the quantity demanded changes only because of a change in the commodity's own price, with every other determinant (income, tastes, prices of related goods) held constant — exactly the ceteris-paribus condition of the Law of Demand. A movement along the curve stays on the same demand curve; it never creates a new curve. There are two kinds of movement:

• Extension of demand — quantity demanded rises because the price of the commodity falls; on the diagram, this is a movement downward and to the right along the same demand curve.
• Contraction of demand — quantity demanded falls because the price of the commodity rises; on the diagram, this is a movement upward and to the left along the same demand curve.

Shift of the demand curve happens when the quantity demanded at every given price changes because of a change in a non-price determinant — income, tastes, the price of a related good, population, expectations, or government policy — while the commodity's own price stays exactly the same. A shift moves the buyer onto an entirely new demand curve. There are two kinds of shift:

• Increase in demand — buyers now demand more of the commodity at every price, so the entire demand curve shifts to the right. Causes include a rise in income (for a normal good), a rise in the price of a substitute, a fall in the price of a complement, a favourable change in taste or fashion, a rise in population, or an expectation that price will rise further in future.
• Decrease in demand — buyers now demand less of the commodity at every price, so the entire demand curve shifts to the left. Causes are simply the reverse: a fall in income (for a normal good), a fall in the price of a substitute, a rise in the price of a complement, an unfavourable change in taste, a fall in population, or an expectation that price will fall further. …