Shifts in Demand Curve

Demand curve is drawn to show the relationship between price and quantity demanded of a commodity, assuming all other factors being constant. However, other factors are bound to change sooner or later. A change in one of ‘other factors’ shifts the demand curve.

For example, suppose income of a consumer increases. Now, the consumer may increase the demand for the product, even though the price has not changed. Such increase in demand of any product, whose price has not changed, cannot be represented by the original demand curve. It will shift the demand curve.

When the demand of a commodity changes due to change in any factor other than the own price of the commodity, it is known as change in demand. It is expressed as a shift in the demand curve.

Various Reasons for Shift in Demand Curve:

(i) Change in price of substitute goods

(ii) Change in price of complementary goods

(iii) Change in income of consumers

(iv) Change in tastes and preferences

(v) Expectation of change in price in future

(vi) Change in population

(vii) Change in distribution of income

(viii) Change in season and weather.

Let us understand the concept of shift in demand curve with the help of diagram.

(i) Increase in Demand is shown by rightward shift in demand curve from DD to D1D1. Demand rises from OQ to OQ1 due to favourable change in other factors at the same price OP.

(ii) Decrease in Demand is shown by leftward shift in demand curve from DD to D2D2. Demand falls from OQ to OQ2 due to unfavourable change in other factors at the same price OP.

In Fig. demand for the commodity is OQ at a price of OP. Change in other factors leads to a rightward or leftward shift in the demand curve:

(a) Rightward Shift

When demand rises from OQ to OQ1 (known as increase in demand) at the same price of OP, it leads to a rightward shift in demand curve from DD to D1D1.

(b) Leftward Shift

On the other hand, fall in demand from OQ to OQ2 (known as decrease in demand) at the same price of OP, leads to a leftward shift in demand curve from DD to D2D2.

INCREASE IN DEMAND

Increase in Demand refers to a rise in the demand of a commodity caused due to any factor other than the own price of the commodity. In this case, demand rises at the same price or demand remains same even at higher price. For example, suppose a research reveals that people who regularly eat green vegetables live longer. This will raise the demand for green vegetables even at the same price and it will shift the demand curve of vegetables towards right.

As seen in the given schedule and diagram, demand rises from 100 units to 150 units at the same price of Rs. 20, resulting in a rightward shift in the demand curve from DD to D1D1.

DECREASE IN DEMAND

Decrease in Demand refers to a fall in the demand of a commodity caused due to any factor other than the own price of the commodity. In this case, demand falls at the same price or demand remains same even at lower price. It leads to a leftward shift in the demand curve.

As seen in given schedule and diagram, demand falls from 100 units to 70 units at same price of Rs. 20, resulting in a leftward shift in the demand curve from DD to D1D1.