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Business LibreTexts

6.18: Changes in Supply and Demand

  • Page ID
    48332
  • Learning Objectives

    • Describe the differences between changes in demand and changes in the quantity demanded
    • Describe the differences between changes in supply and changes in quantity supplied

    It’s hard to overstate the importance of understanding the difference between shifts in curves and movements along curves. Remember, when we talk about changes in demand or supply, we do not mean the same thing as changes in quantity demanded or quantity supplied.

    A change in demand refers to a shift in the entire demand curve, which is caused by a variety of factors (preferences, income, prices of substitutes and complements, expectations, population, etc.).  In this case, the entire demand curve moves left or right.

    A supply and demand graph showing three demand curves D0, D1, and D2, with arrows indicating that D0 can shift to become D1 or to D2.
    Figure 1. Change in Demand. A change in demand means that the entire demand curve shifts either left or right. The initial demand curve D0 shifts to become either D1 or D2. This could be caused by a shift in tastes, changes in population, changes in income, prices of substitute or complement goods, or changes future expectations.

    A change in quantity demanded refers to a movement along the demand curve, which is caused only by a change in price.  In this case, the demand curve doesn’t move; rather, we move along the existing demand curve.

    A supply and demand graph showing a single demand curve, D0, with two arrows indicating movement along the curve in either direction.
    Figure 2. Change in Quantity Demanded. A change in the quantity demanded refers to movement along the existing demand curve, D0. This is a change in price, which is caused by a shift in the supply curve.

    Similarly, a change in supply refers to a shift in the entire supply curve, which is caused by shifters such as taxes, production costs, and technology.  Just like with demand, this means that the entire supply curve moves left or right.

    A supply and demand graph showing three supply curves S0, S1, and S2, with arrows indicating that S0 can shift to become S1 or to S2.
    Figure 3. Change in Supply. A change in supply means that the entire supply curve shifts either left or right. The initial supply curve S0 shifts to become either S1 or S2. This is caused by production conditions, changes in input prices, advances in technology, or changes in taxes or regulations.

    A change in quantity supplied refers to a movement along the supply curve, which is caused only by a change in price.  Similar to demand, a change in quantity supplied means that we’re moving along the existing supply curve.

    A supply and demand graph showing a single supply curve, S0, with two arrows indicating movement along the curve in either direction.
    Figure 4. Change in Quantity Supplied. A change in the quantity supplied refers to movement along the existing supply curve, S0. This is a change in price, caused by a shift in the demand curve.

    Here’s one way to remember: a movement along a demand curve, resulting in a change in quantity demanded, is always caused by a shift in the supply curve. Similarly, a movement along a supply curve, resulting in a change in quantity supplied, is always caused by a shift in the demand curve.

    Watch It

    Watch this video for another demonstration of the important distinction between these terms.

    A link to an interactive elements can be found at the bottom of this page.

    Try It

    Try graphing each of these situations to determine if they cause a shift in demand, quantity demanded, supply, or quantity supplied.

    https://assessments.lumenlearning.co...sessments/7128
    https://assessments.lumenlearning.co...sessments/7129
    https://assessments.lumenlearning.co...sessments/7130
    https://assessments.lumenlearning.co...sessments/7131

    Learning Objectives

    [glossary-page][glossary-term]demand: [/glossary-term]
    [glossary-definition]the relationship between the price and the quantity demanded of a certain good or service[/glossary-definition][glossary-term]quantity demanded: [/glossary-term][glossary-definition]the total number of units of a good or service consumers are willing to purchase at a given price[/glossary-definition][glossary-term]quantity supplied: [/glossary-term][glossary-definition]the total number of units of a good or service producers are willing to sell at a given price[/glossary-definition][glossary-term]shift in demand: [/glossary-term]
    [glossary-definition]when a change in some economic factor (other than price) causes a different quantity to be demanded at every price[/glossary-definition][glossary-term]shift in supply: [/glossary-term][glossary-definition]when a change in some economic factor (other than price) causes a different quantity to be supplied at every price[/glossary-definition][glossary-term]supply: [/glossary-term]
    [glossary-definition]the relationship between price and the quantity supplied of a certain good or service[/glossary-definition][/glossary-page]

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