PIP: This article presents an analysis of the relationship between population size and market demand in China. It is argued that a smaller elasticity of a product is related to a greater impact of the size of population on the consumption of such a product. Greater elasticity reduces the impact of population. The impact of population is also mediated by average salary and salary structure. Salary structure affects prices, and prices affect supply and demand, which affect consumption.
Draw the graph of a demand curve for a normal good like pizza. Pick a price like P 0. Identify the corresponding Q 0. An example is shown in Figure 5. Figure 5. Demand Curve. A demand curve can be used to identify how much consumers would buy at any given price. S tep 2.
Suppose income increases. As a result of the change, are consumers going to buy more or less pizza? The answer is more. Draw a dotted horizontal line from the chosen price, through the original quantity demanded, to the new point with the new Q 1. Draw a dotted vertical line down to the horizontal axis and label the new Q 1. An example is provided in Figure 6. Figure 6.
Demand Curve with Income Increase. With an increase in income, consumers will purchase larger quantities, pushing demand to the right. Step 3. Now, shift the curve through the new point.
You will see that an increase in income causes an upward or rightward shift in the demand curve, so that at any price, the quantities demanded will be higher, as shown in Figure 7.
Figure 7. Demand Curve Shifted Right. With an increase in income, consumers will purchase larger quantities, pushing demand to the right, and causing the demand curve to shift right. Figure 8. Remember that changes in price change the point of quantity demanded on the demand curve, but changes in other factors such as taste, population, income, expectations, and prices of other goods will cause the entire demand curve to shift.
Six factors that can shift demand curves are summarized in Figure 9, below. The direction of the arrows indicates whether the demand curve shifts represent an increase in demand or a decrease in demand. Notice that a change in the price of the good or service itself is not listed among the factors that can shift a demand curve. A change in the price of a good or service causes a movement along a specific demand curve, and it typically leads to some change in the quantity demanded, but it does not shift the demand curve.
Figure 9. Improve this page Learn More. Skip to main content. Module 3: Supply and Demand. Search for:. Factors Affecting Demand Learning Objectives Describe which factors cause a shift in the demand curve and explain why the shift occurs Define and give examples of substitutes and complements Draw a demand curve and graphically represent changes in demand. Figure 1. Shifts in Demand: A Car Example.
Try It. Watch It A change in price does not shift the demand curve. Demand goes up. And remember, when we're talking about when demand goes up, we're talking about the whole curve shifting to the right. At any given price point, we are going to have a larger quantity demanded. So the whole curve, this whole demand schedule would change. And likewise if income went down, demand would go down. And we're going to see in a future video-- it's actually quite interesting-- that's not always the case.
This is only true for normal goods. And in a future video we'll see goods called inferior goods where this is not necessarily the case. Or by definition for an inferior good, it would not be the case. Now the other ones that are somewhat intuitive are population-- once again, if population goes up, obviously, at any given price point, more people will want it.
So it would shift the demand curve to the right, or it would increase demand. If population were to go down, it would decrease demand, which means shifting the whole curve to the left. And then the last one we'll talk about-- and remember, we're holding all of these things constant in order for demand not to change.
The last thing is just preferences. We're assuming that people's tastes and preferences don't change while we move along a specific demand curve. If preferences actually change, then it will change the curve. So for example, if all of a sudden, the author of the book is on some very popular talk show that tells everyone that this is the best book that was ever written, then preferences would go up, and that would increase the total demand.
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