Shifts in the Demand Curve

Shifts in the demand curve are caused by factors other than the price of the product changing.

Shift in the demand curve

Possible causes for a shift in demand is are:

  • Changes disposable incomes after tax
  • Changes in price of substitutes
  • Changes in the price of a complement products (joint demand)
  • Tastes and fashion changes
  • Spending on advertising
  • Population changes
  • Other factors, e.g. hot weather increases demand for cold drinks and sun creams

Substitute products

Substitute products have a positive relationship. If price of one goes up, demand for the other goes up and vice versa.

Examples of Substitute products are butter and margarine. If the price of butter had to increase, it could lead to demand for margarine increasing from D1 to D2 (outward shift).

Margarine

increase in demand

Complements or Joint demand products

Complements have a negative or inverse relationship. If the price of one goes up, the demand for the other goes down.

Examples of complement products are printers and ink cartridges, fuel and cars.

If the price of printers had to increase, it could lead to the demand for ink cartridges decreasing from D1 to D2 (inward shift).

Ink Cartridges

Decrease in demand

2 thoughts on “Shifts in the Demand Curve”

  1. This is fantastic. Thank you for the explanations, both text and video. They are super helpful and not difficult to follow. Please do keep it up.

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