A Shift versus a Movement Along a Demand Curve

A Shift versus a Movement Along a Demand Curve

It is essential to distinguish between a movement along a demand curve and a shift in the demand curve. A change in price results in a movement along a fixed demand curve. This is also referred to as a change in quantity demanded. For example, an increase in video rental prices from $3 to $4 reduces quantity demanded from 30 units to 20 units. This price change results in a movement along a given demand curve. A change in any other variable that influences quantity demanded produces a shift in the demand curve or a change in demand. The terminology is subtle but extremely important. The majority of the confusion that students have with supply and demand concepts involves understanding the differences between shifts and movements along curves.

TABLE 4 Change in Demand for Videos after Incomes Rise
Price	Initial Quantity Demanded	New Quantity Demanded	Quantity Supplied
$5	10	30	50
$4	20	40	40
$3	30	50	30
$2	40	60	20
$1	50	70	10

Suppose that incomes in a community rise because a factory is able to give employees overtime pay. The higher incomes prompt people to rent more videos. For the same rental price, quantity demanded is now higher than before. Table 4 and the figure titled "Shift in the Demand Curve" represent that scenario. As incomes rise, the quantity demanded for videos priced at $4 goes from 20 (point A) to 40 (point A'). Similarly, the quantity demanded for videos priced at $3 rises from 30 to 50. The entire demand curve shifts to the right.

A shift in the demand curve changes the equilibrium position. As illustrated in the figure titled "Equilibrium After a Demand Curve Shift" the shift in the demand curve moves the market equilibrium from point A to point B, resulting in a higher price (from $3 to $4) and higher quantity (from 30 to 40 units). Note that if the demand curve shifted to the left, both the equilibrium price and quantity would decline.