The demand curve is a graphical representation plotted against a commodity’s price and quantity demanded. Using this method, economists can study and analyze the supply and demand of a commodity in the market.
Moreover, this shows the relationship between price and demand for a commodity, showing either movement or shift on the demand curve.
- A movement along the demand curve results from a price change, while a shift in the demand curve arises from factors other than price.
- An increase in demand causes the demand curve to shift rightward; a decrease in demand shifts the curve leftward.
- Factors causing shifts in demand include income, population, consumer preferences, and expectations.
Movement vs Shift in Demand Curve
A movement along a demand curve is caused by a change in the price of a good or service, resulting in a change in the quantity required. A shift in the demand curve occurs when any other element impacting demand changes, such as a change in consumer preferences or income.
Meanwhile, in the Demand curve, the movement is responsible when there is a slight or huge change in price and quantity demand for a specific commodity in the market.
The curve extends or contracts depending upon its price change and quantity demand. So with this, one gets to know the insights of one’s products and their demands among customers.
While on the other hand, when the quantity demanded changes due to factors, but the price remains the same, we describe this type of graphical representation as a shift in the demand curve.
This shift could be for various reasons, including the change in the number of customers, their tastes, and their incomes.
|Parameters of Comparison||Movement||Shift in Demand Curve|
|Meaning||Movement in the demand curve indicates variation in price as well as commodity’s demanded quantity.||Shifts appear when the changes in demands occur, alongside other factors; keeping price constant.|
|Price and Demand||A change in price affects the quantity demanded of a product, too.||Price remains constant, whereas quantity demanded depends on various factors.|
|Factors||Price and quantity demanded play an influential role in creating movement on the demand curve.||Change in demand caused by Income, preferences, prices of goods, expectations in the future, population.|
|Curve||Upward movement- price increase; Downward movement- price decrease.||As demand increases, it is a rightward shift;|
As demand decreases, it is a leftward shift.
|Effect on the supply curve||Expansion and contraction of the supply curve||Increase and decrease of the supply curve|
What is Movement?
In demand curves, a movement would be drawn on the graph, illustrating a move in the price (y-axis) and quantity demand (x-axis) of a commodity.
Further, the movement embodies the consistent relationship of a commodity among customers. In the demand-price graph, small variations in price cause the demand curve to move and, eventually, result in changes in the quantity demanded.
In the abstract, one can gain insight into one’s products and their demands as well as how the products are perceived by customers.
The prices and quantities demanded of a particular commodity are the two primary factors that influence the movement of the demand curve, as per the demand curve, where there is an upward movement that indicates an increase in prices.
While a downward movement represents a decrease in the price of that commodity.
The curve extends or contracts according to quantity and price changes. To put it in simple words, the extension of the movement in the demand curve is due to the growth in commodity demands and a plunge in price.
On the contrary, the contraction of the movement in the demand curve is caused by a drop in demand and a rise in the price.
What is Shift in Demand Curve?
As we know, demand curves are plotted about the expenditure and abundance of a product. That being so, the demand curve exhibits a shift when the quantity demanded changes due to factors, but the price remains the same.
Various commercial reasons might account for this alteration in the demand schedule of an entity in the market, such as the change in the number of customers, their incomes, taste & preferences, pricing of related products, size of the population, and expectations for the future.
Therefore, a shift in demand curves entirely depends on the above factors, whereas the commodity’s price remains unchanged.
A shift is an important parameter in demand curves because it changes the commodity’s amount purchased by people at every price point.
Furthermore, the shift in the demand curve conveys two meanings, like the rightward shift indicates favourable factors with an increase in demand, eventually rising in price and commodity.
While the leftward shift indicates unfavourable factors leading to a decrease in demand, tending to a drop in profits and commodities.
For instance, the shift in the demand curve for cold drinks during summertime is towards the right, such that the demand for cold drinks increases in summer.
Whereas it is towards the left, indicating a decline in the demand for cold drinks during summertime.
Main Differences Between Movement and Shift in Demand Curve
- A demand curve’s movement demonstrates a change in price plus the quantity requested for a commodity. On the other hand, a shift in the demand curve occurs when the price remains constant, but demand varies due to some factors of production.
- Price and quantity demanded are inter-dependable factors in terms of movement on the demand curve. Whereas, even if demand changes according to various factors and shifts the demand curve, the price remains the same.
- In the case of movement on the demand curve, the supply curve remains the same. But for the shift on the demand curve, the supply curve shifts either right or left side.
- Only one demand curve is taken into account to see the movement in the demand curve, where upward movement shows a positive rise in price and demand and vice versa for downward movement.
- On the contrary, there are two demand curves: a rightward shift indicates an increase in demand due to favourable factors, and a leftward shift indicates a decrease in demand due to unfavourable factors.
- Movement in the demand curve shows expansion & contraction of supply, but the demand curve’s shift exhibits either a gain or reduction of the supply schedule.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.