Forces behind Demand Curve, and shifts in Demand explained

Demand schedules and Demand curves are tools used to summarize the relationship between quantity demanded and price.

Demand schedules/ curves relate the prices and quantities demanded assuming other factors remain constant. This is called the ceteris paribus assumption. If you neither need nor want something, you will not buy it. So the demand schedule reflects based on changes in price and demand assuming no other factors change. Economists call this assumption of no other factors to change ceteris paribus, a Latin phrase meaning “other things being equal”.

Forces behind the Demand Curve shifts in Demand:

We now know that the demand schedule reflects only when other things remain unchanged. Let us now explore what happens when other factors aren’t held constant.

Image: New equilibrium takes place when demand shifts from D1 to D2.

Movements along a demand curve are related to a change in price, resulting in a change in quantity; shifts in demand (D1 to D2) are specific to changes in income, preferences, availability of substitutes, and other factors.

The factors that may cause shifts in the demand curve are:

1. Change in buyers’ income
2. Availability of substitute goods
3. Buyers’ tastes and preferences
4. Buyers’ Expectations of when Prices will rise or fall in the future
5. Changes in population (generational, migration, etc.)

Conclusion:

Higher incomes, non-availability of substitute goods, increases in population, and expectations of higher prices shortly can all shift demand to the right. On the other hand, other things that decrease demand include the population’s tastes and preferences change over time, the composition or size of the population, the prices of related goods, and even expectations, the curve shifts left. This can occur as a population’s tastes change over time.

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