Introduction
The distinction between a movement along the demand curve and a shift of the demand curve is foundational in price theory. A movement along the curve reflects a change in quantity demanded brought about exclusively by a change in the price of the commodity itself; a shift of the curve indicates a change in demand arising from non-price determinants. Precise understanding of this difference is essential for interpreting market behaviour, policy effects and practical forecasting.
Explanation: Movement along the Demand Curve (Change in Quantity Demanded)
A movement along the demand curve occurs when there is a change in the commodity's price and all other determinants of demand remain unchanged. In this case the demand curve (D) remains fixed and price variation causes a point-to-point movement along that curve. A fall in price causes a downward movement along the curve to the right (increase in quantity demanded); a rise in price produces an upward movement to the left (decrease in quantity demanded).
Key characteristics of movement along the demand curve
- Cause: Change in own-price of the commodity.
- Effect: Change in quantity demanded only (not demand).
- Curve: Same demand curve; point-to-point movement.
- Analysis: Used to study price responsiveness (elasticity) at a point on demand curve.
- Graphical representation: A single downward-sloping curve with two points representing (P₁, Q₁) and (P₂, Q₂).
Explanation: Shift of the Demand Curve (Change in Demand)
A shift in the demand curve denotes a change in demand for the commodity at every possible price. Shifts arise from changes in non-price determinants: income, tastes, prices of related goods, expectations, population, government policy, etc. An increase in demand shifts the curve to the right (D → D₁), while a decrease shifts it to the left (D → D₂). Price here is held constant while the whole relationship between price and quantity demanded alters.
Key characteristics of shift in demand curve
- Cause: Change in non-price determinants (income, tastes, prices of substitutes/complements, population, etc.).
- Effect: Change in demand (quantity demanded at each price), not merely quantity demanded.
- Curve: Entire demand schedule/curve moves to a new position.
- Analysis: Used to study structural changes in market demand and policy impacts.
Comparative Summary: Movement vs Shift
| Aspect | Movement along Demand Curve | Shift of Demand Curve |
|---|---|---|
| Cause | Change in own-price of the commodity | Change in income, tastes, prices of related goods, population, expectations, policy |
| Effect | Change in quantity demanded only | Change in demand at every price (quantity at each price changes) |
| Curve | Same curve; movement from one point to another | Entire curve shifts right (increase) or left (decrease) |
| Graphical marker | Two points on same curve (P₁,Q₁) → (P₂,Q₂) | New curve D₁ or D₂ drawn parallel/near original |
| Policy relevance | Short-run price analysis; elasticity | Structural changes, long-run policy and market analysis |
Detailed Causes of Demand Shifts (with examples)
- Change in consumer income: For a normal good (e.g., branded clothing), an increase in income shifts demand right; for an inferior good (e.g., low-quality staple), an increase in income may shift demand left.
- Change in tastes and preferences: Successful advertising or changes in fashion can raise demand for specific goods (e.g., smartphones), shifting demand right.
- Prices of substitutes: If the price of coffee rises, demand for tea (a substitute) increases — Dtea shifts right.
- Prices of complements: A fall in petrol price increases demand for cars — car demand shifts right.
- Population and demographics: Increase in population or change in age-distribution can expand market demand for certain commodities (e.g., baby food).
- Expectations: Anticipation of future price rises or shortages leads to higher present demand (stocking behaviour), shifting current demand right.
- Government policy and taxation: Subsidies for essential goods increase demand; heavy taxation reduces demand.
Interaction with Elasticity and Revenue
Movement along the demand curve is the context in which price elasticity of demand is measured. Elasticity determines revenue response:
- If demand is elastic at a point (|E| > 1), a fall in price increases total revenue (TR); a rise in price reduces TR.
- If demand is inelastic at a point (|E| < 1), a rise in price increases TR; a fall in price reduces TR.
- If demand is unitary elastic (|E| = 1), small price changes do not affect TR.
Common Examination Errors to Avoid
- Confusing a movement along the curve with a shift — emphasise cause (price vs non-price).
- Failing to label axes (Price on vertical, Quantity on horizontal) — always label diagrams clearly.
- Omitting examples for causes of shift — use one-line examples to demonstrate understanding.
- Neglecting elasticity implications when discussing movement — link to revenue where relevant.
Conclusion
In summary, movement along the demand curve and shift of the demand curve are distinct concepts with different causes and implications. Correct identification of whether a change is due to own-price or other determinants is essential for applied economic analysis, policy evaluation and business decision-making. The analytical clarity provided by this distinction is core to the TR Jain & V.K. Ohri exposition and to practical market interpretation.