EC 201 Study Guide - Final Guide: Demand Curve, Normal Good, Inferior Good
Document Summary
Demand curves and supply curves: there is a decrease in the price of a pair of blue jeans. It is very important to distinguish between a movement along an existing demand curve and a shift to a new demand curve. When we construct a demand curve, we allow the price to vary, while holding constant every other possible influence on buyers. Thus if the price changes, we move along the existing demand curve. In order to shift to a new demand curve, it is necessary for something else to change. The demand shifters are the influences on buyers that are held constant when we construct a particular demand curve. These include tastes or preferences, buyers" incomes, the prices of complements and substitutes, buyers" expectations about future prices and incomes, and the number of buyers: there is a decrease in consumer incomes. As a result of this decrease in consumer incomes, the demand curve for smart phones shifts to the left.
