Movements of the Demand Curve - 21

The demand curve slopes downwards. This illustrates the assumption that consumers will try to maximise their satisfaction by making choices between the goods and services they buy. If the price of a good falls, then consumers will buy more of it. A change in price causes a contraction or expansion of demand. These, as you will recall, are movements along a given demand curve.

The demand curve can shift (a movement of the whole curve, to the right or left) for a variety of reasons.

Key Concept : The demand curve shifts to the left or the right if all households operating in the market are effected by the change in market conditions. Demand can increase (a shift of the whole curve to the right) if households have more income to spend. Before the increase in income, households would buy Qo of a good at price Po. With higher incomes, households will be willing to pay more (price P1) for the same quantity of the good or service in question.