Shifts in demand

The position of the demand curve will shift to the left or right following a change in an underlying determinant of demand.

Increases in demand are shown by a shift to the right in the demand curve. This could be caused by a number of factors, including a rise in income, a rise in the price of a substitute or a fall in the price of a complement.

Demand schedule

A shift in demand to the right means an increase in the quantity demanded at every price. For example, if drinking cola becomes more fashionable demand will increase at every price.

PRICE (£)ORIGINAL QdNEW Qd
1.100100
1.00100200
90200300
80300400
70400500
60500600
50600700
40700800
30800900

Increases in demand

An increase in demand can be illustrated by a shift in the demand curve to the right.

Increase in demand for cola

Decreases in demand

Conversely, demand can decrease and cause a shift to the left of the demand curve for a number of reasons, including a fall in income, assuming a good is a normal good, a fall in the price of a substitute and a rise in the price of a complement.

Demand schedule

For example, if the price of a substitute, such as fizzy orange, falls, then less cola is demanded at each price, as consumers switch to the substitute.

PRICE (£)ORIGINAL QdNEW Qd
1.100
1.00100
90200100
80300200
70400300
60500400
50600500
40700600
30800700

Decreases in demand are shown by a shift of the demand curve to the left.

demand for cola decreases

 

Examples

Shifts-in-demandQuantityPriceQPSDD1P1Q1QuantityPriceQPSDD1P1Q1Shift in demand Example: effect of an increase in income on a normal goodShift in demand Example: effect of a fall in priceof a substitute products