Movements along the Demand Curve and Shifts in the Demand Curve

Movements Along the Demand Curve

The demand curve is drawn under the ceteris paribus condition — everything except the good's own price is held fixed. When the price of the good itself changes, the consumer moves to a different point on the same demand curve. This is called a movement along the demand curve.

For example, suppose the price of a good falls from ₹10 to ₹8. At the original price, the consumer bought 5 units (point A on the curve). At the lower price, she buys 7 units (point B). The movement from A to B is along the curve — the curve itself has not changed. The only thing that has changed is the quantity demanded, caused by a change in the good's own price.

Shifts in the Demand Curve

When any factor other than the good's own price changes, the entire demand curve shifts to a new position. This is called a shift in the demand curve. The factors that cause a shift are:

• Income of the consumer: For a normal good, an increase in income shifts the demand curve to the right (more demanded at every price). For an inferior good, an increase in income shifts it to the left.
• Prices of other goods: If a substitute good becomes cheaper, demand for the original good falls (curve shifts left). If a complement becomes cheaper, demand for the original good rises (curve shifts right).
• Tastes and preferences: A favourable change in tastes (e.g., a new health study praising the good) shifts the curve rightward. An unfavourable change shifts it leftward.

Panel (a) of Figure 2.17 shows a leftward shift — at every price, the consumer now demands less than before. Panel (b) shows a rightward shift — at every price, she demands more.

Market Demand

So far we have considered a single consumer. In reality, a market has many consumers. The market demand for a good at a given price is the sum of the quantities demanded by all consumers at that price.

If there are only two consumers in the market, and at price $p'$ consumer 1 demands $q'_1$ units and consumer 2 demands $q'_2$ units, then the market demand at $p'$ is:

Similarly, at price $\hat{p}$, if consumer 1 demands $\hat{q}_1$ and consumer 2 demands $\hat{q}_2$, the market demand is $\hat{q}_1 + \hat{q}_2$.

This logic extends to any number of consumers. The market demand curve is obtained by horizontally summing the individual demand curves — that is, adding the quantities demanded by each consumer at each price.

Worked Example: Adding Two Linear Demand Curves

Consider a market with exactly two consumers. Their individual demand curves are:

These are linear functions. However, note the domain restrictions: consumer 1 demands zero units at any price greater than 10 (because $10 - p$ becomes negative, and negative demand is meaningless). Similarly, consumer 2 demands zero at any price greater than 15.

To derive the market demand, we add the two functions piecewise, respecting these cutoffs.

Case 1: Price $\leq$ 10

Both consumers demand positive quantities. So:

Case 2: $10 < p \leq 15$

Consumer 1 demands zero. Only consumer 2 is active. So:

Case 3: $p > 15$

Both consumers demand zero. So:

The market demand curve therefore has a kink at $p = 10$ and another at $p = 15$. It is not a single straight line — it is a piecewise linear curve.

Graphical Derivation of Market Demand …