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Jesse Handel
Jesse Handel, Scientist
Category: General
Satisfied Customers: 262
Experience:  B.S. Degree Chem. & Bact. 7 yrs tax preparation.
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you explain what the difference is between a movement along

Resolved Question:

you explain what the difference is between a movement along and shift of the demand curve
Submitted: 2 years ago.
Category: General
Expert:  Jesse Handel replied 2 years ago.

Hello and thank you for coming to Just Answer. We appreciate the opportunity to help you with your questions. I can't tell what level of understanding you currently have, so if my explanation is too basic, let me know and I will keep working with you until I can find the right level of information to answer your question to your satisfaction.

The demand curve is the measure of the amount of something consumers will purchase at a given price. With all other factors except price held constant, there is movement along the demand curve. When a merchant lowers the price of a good, the public will buy more of the good from that merchant. A shift in the demand curve occurs when other factors besides price change the situation. A shift in the demand curve is the result of something that makes the consumer see the good as more or less desirable regardless of the price. The new factor moves the demand curve up or down, resulting in more or less quantity of the good purchased at the same price as before.

One example you could use is ice cream. If you chart the demand curve for ice cream, then as the ice cream store increases the price of ice cream, people buy less ice cream. If the store reduces the price, people buy more. But if a heat wave strikes the area and outside temperatures soar, people will buy more ice cream regardless of the price. The hotter day causes a shift in the demand curve. Consumers will buy more ice cream at every price than they did on a cooler day.

This is a simple example of an elastic demand curve. If the price drops, people buy more and if the price rises, people buy less. The amount people will buy at a given price can change based on other factors that cause a shift in the demand curve, so that people buy more or less of the good at the same price than they did in the absence of the new factor.

There are other types of goods with demand driven by other factors that have to be modeled by other types of demand curves. Not all goods can be modeled by a simple elastic demand curve of price versus quantity. For example, gasoline is controlled by a mostly inelastic demand curve. Over the short term, people still have to buy about the same amount of gas regardless of the price. They can't just buy a lot less when the price rises because they still have to get to work and other places. There is some reduction of use, but the majority of uses aren't optional. Over the long term, people will buy new cars with higher gas mileage or move to different places closer to their jobs or make other changes but these changes take time. There are also demand curves with an upper quantity cap. Some goods people will only buy so much of, regardless of price. Milk might be a good example. You can only use so much milk before it goes bad, so even if the store is giving milk away, you will only demand a certain quantity before you don't want any more.

If you need more information about the types of demand curves, please let me know and I can go into detail about it. I hope the example of the ice cream and the explanation answer your question about the different between moving along the demand curve and a shift in the demand curve. Please let me know if you need more help with the difference. I can probably find other examples in my textbooks about external factors that can cause shifts in the demand curve, if you need more information.

Customer: replied 2 years ago.

Can you help me with some additional information I am looking for? It's regarding the question I have asked. .. it's the second part of the homework I am working on.

Show the impact on the equilibrium price and quantity that results from; (1) an increase in demand, (2) an increase in supply, (3) an increase in both supply and demand.

Expert:  Jesse Handel replied 2 years ago.

Sure. The equilibrium price and quantity is the price and quantity at which the quantity of the good that buyers are willing and able to buy exactly balances the quantity that sellers are willing and able to sell.

If demand increases, then there will be a shift in the demand curve. The shift in the demand curve allows the sellers to raise their prices because there is a temporary shortage of quantity and sellers can increase their prices without losing sales. The equilibrium price is reestablished at a higher price.

If supply increases, there will be a shift in the supply curve. The shift in the supply curve means that sellers have more quantity than consumers want to buy. Sellers will be forced to lower their prices in order to sell the excess quantity. The equilibrium price will be reestablished at a lower price.

If there is an increase in both supply and demand, both the supply and demand curves will shift. The impact on the equilibrium price depends on the relative changes in both curves. If supply increases faster than demand, the equilibrium price will lower. If demand increases faster than supply, the equilibrium price will rise. If both supply and demand increase the same amount, the equilibrium price will remain the same. This is based on the long-term impacts, since in the short-term, the supply and demand won't increase the same amount at the same time, so there will be short-term imbalances before the market stabilizes to its final position.

Please let me know if you need any more information.

Jesse Handel, Scientist
Category: General
Satisfied Customers: 262
Experience: B.S. Degree Chem. & Bact. 7 yrs tax preparation.
Jesse Handel and 89 other General Specialists are ready to help you
Customer: replied 2 years ago.
Thank you very much. This will definitely help me get started on my paper due Monday. I appreciate your assistance.

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