Diagrams that illustrate shifts of a demand curve

Published by Patrick Mutisya · 14 days ago

Cambridge IGCSE Economics 0455 – The Allocation of Resources: Demand

The Allocation of Resources – Demand

Objective

To be able to draw and explain diagrams that illustrate shifts of a demand curve.

1. The Demand Curve – basic concepts

The demand curve shows the relationship between the price of a good (\$P\$) and the quantity demanded (\$Q_d\$), holding all other factors constant (ceteris paribus). It is usually downward‑sloping because of the law of demand.

In functional form the demand relationship can be written as:

\$Qd = f(P,\;Y,\;T,\;Ps,\;P_c,\;E,\;N)\$

where:

  • \$Y\$ = consumer income

  • \$T\$ = tastes and preferences

  • \$P_s\$ = price of substitute goods

  • \$P_c\$ = price of complementary goods

  • \$E\$ = expectations of future prices or income

  • \$N\$ = number of buyers

2. What causes the demand curve to shift?

A shift occurs when any of the non‑price determinants (\$Y, T, Ps, Pc, E, N\$) change. The direction of the shift depends on whether the change increases or decreases the quantity demanded at every price.

3. Diagrammatic illustration of demand shifts

3.1 Increase in Demand (right‑hand shift)

When a factor such as an increase in consumer income for a normal good occurs, the entire demand curve moves to the right from \$D1\$ to \$D2\$. At each price, a larger quantity is demanded.

Suggested diagram: Original demand curve \$D1\$ and new demand curve \$D2\$ shifted rightward; label axes (Price on vertical axis, Quantity on horizontal axis); show equilibrium points \$E1\$ and \$E2\$ with corresponding price and quantity changes.

3.2 Decrease in Demand (left‑hand shift)

A fall in consumer confidence (negative expectations) or a decrease in income for a normal good shifts the demand curve leftward from \$D1\$ to \$D2\$. At each price, a smaller quantity is demanded.

Suggested diagram: Original demand curve \$D1\$ and new demand curve \$D2\$ shifted leftward; label axes; indicate new equilibrium \$E2\$ with lower price and quantity compared with \$E1\$.

3.3 Movement along the demand curve (price change only)

If only the price changes while all other determinants remain unchanged, the movement is *along* the same demand curve, not a shift. A fall in price moves from point \$A\$ to point \$B\$ on \$D\$, illustrating the law of demand.

Suggested diagram: Single demand curve \$D\$ with two points \$A\$ (higher price, lower quantity) and \$B\$ (lower price, higher quantity) connected by an arrow indicating movement along the curve.

4. Summary of factors and direction of demand shifts

FactorEffect on Demand for a Normal GoodDirection of Shift
Increase in consumer income (\$Y\$)Higher quantity demanded at each priceRightward
Decrease in consumer income (\$Y\$)Lower quantity demanded at each priceLeftward
More favourable tastes/preferences (\$T\$)Higher quantity demandedRightward
Less favourable tastes/preferences (\$T\$)Lower quantity demandedLeftward
Rise in price of substitutes (\$P_s\$)Consumers switch to the good, increasing demandRightward
Fall in price of substitutes (\$P_s\$)Consumers switch away, decreasing demandLeftward
Rise in price of complements (\$P_c\$)Less demand for the related goodLeftward
Fall in price of complements (\$P_c\$)More demand for the related goodRightward
Expectations of higher future price (\$E\$)Current demand risesRightward
Expectations of lower future price (\$E\$)Current demand fallsLeftward
Increase in number of buyers (\$N\$)Higher overall demandRightward
Decrease in number of buyers (\$N\$)Lower overall demandLeftward

5. How to draw the diagrams in an exam

  1. Label the vertical axis “Price (\$P\$)” and the horizontal axis “Quantity demanded (\$Q\$)”.

  2. Draw the initial demand curve (\$D_1\$) as a downward‑sloping line.

  3. Identify the factor causing the shift and decide the direction (right for increase, left for decrease).

  4. Draw the new demand curve (\$D2\$) parallel to \$D1\$ on the appropriate side.

  5. Mark the original equilibrium (\$E1\$) and the new equilibrium (\$E2\$) where each demand curve meets the supply curve (if shown).

  6. Clearly label the shifts, equilibrium points, and any changes in price and quantity.

6. Conclusion

Understanding how and why the demand curve shifts is essential for analysing market outcomes. By mastering the diagrammatic representation of these shifts, students can confidently answer IGCSE exam questions that require explanation of changes in consumer behaviour and market equilibrium.