Shifts in Quantity Demanded and Supplied Curves

Tax on buyers

Demand curve shifts down (by the amount of the tax)

Three steps to analyzing changes in the Market Equilibrium

1. decide whether the event shifts the Demand curve or the Supply curve 2. decide which direction the curve shifts 3. use supply/demand diagram to see how shift changes equilibrium point

expectation (S)

Supply curve; depending on the situation sellers will either increase (shift right) or decrease (shift left) their quantity supplied in expectation of a change in the market without any change in price actually occurring. (often when expecting higher input prices, sellers reduce supply (shift left) to save inventory to sell later at a higher price, this is called hoarding and is illegal)

What causes a demand curve to shift?

The demand curve shifts when some factor of the market changes. The Law of Demand only holds when "all thing being equal," therefore any non-price determinants of demand cause the demand curve to shift

What causes a supply curve to shift?

The supply curve shifts when some factor of the market changes. The Law of Supply only holds when "all thing being equal," therefore any non-price determinants of supply cause the supply curve to shift

increase in income

Demand curve shifts right (because of the increase in quantity demanded at each price) [for a normal good the curve shifts right, for an inferior good the curve shifts left]

increase in number of buyers

Demand curve shifts right (because of the increase in quantity demanded by the increased number of buyers)

preference shift toward a good

Demand curve shifts right (because preference toward a good causes an increase in quantity demanded for that good)

complement price decreases

Demand curve shifts right (because the decrease in the price of one cause the increase in quantity demanded of the other)

Subsidy

Demand curve shifts up (by the amount of the subsidy)

input prices decrease

Supply curve shifts right (because the quantity supplied increases while price stays constant; able to supply more for same price)

substitute price decreases

Demand curve shifts left (because a decrease in the price of one causes an decrease in quantity demand of the other)

preference shifts away from a good

Demand curve shifts left (because dislike of a good causes a decrease in quantity demanded for that good)

decrease in income

Demand curve shifts left (because of the decrease in quantity demanded at each price) [for a normal good the curve shifts left, for an inferior good the curve shifts right]

complement price increases

Demand curve shifts left (because the increase in the price of one causes the decrease in quantity demanded of the other)

substitute price increases

Demand curve shifts right (because an increase in the price of one causes an increase in the quantity demand for the other)

expectation (D)

Demand curve; depending on the situation, consumers expectations will either increase (shift right) or decrease (shift left) quantity demanded without the price of a good actually changing (often the largest change is in the long run rather than the short run)

cost-saving technology

Supply curve shift right (because with cheaper production costs input prices fall causing quantity supplied to increase)

input prices increase

Supply curve shifts left (because the quantity supplied increases when prices stay constant; able to supply less for same price)

increase in number of sellers

Supply curve shifts right (because the quantity supplied increases at each price with an increased number of sellers; more people are selling the same good to the same market)