The quantities consumers are willing and able to buy at various prices, holding other relevant factors constant.

The amount consumers buy at one specific price. A change in the product's own price changes quantity demanded.

A rightward or leftward movement of the entire demand curve caused by a nonprice determinant.

A good for which demand increases when consumer income increases.

A good for which demand decreases when consumer income increases.

The relationship between a product's price and the quantities consumers are willing and able to buy, holding other factors constant.

Products commonly used together; a price increase for one tends to decrease demand for the other.

A product for which demand rises when consumer income rises.

Products that can satisfy similar needs; a price increase for one tends to increase demand for the other.

Discovering What Shifts Demand — Microeconomics Week 2: Supply, Demand, and Market Equilibrium

Q: The price of streaming devices falls. Assuming streaming devices and streaming subscriptions are complements, what happens in the market for streaming subscriptions?

Demand for subscriptions shifts right.. Streaming devices and subscriptions are complements. A lower device price encourages device purchases and increases demand for subscriptions at every subscription price. Therefore, the subscription demand curve shifts right.

1. Start With the Key Distinction

One Curve, Two Different Changes

A demand curve shows quantity consumers are willing and able to buy at each possible price, with other relevant factors held constant.

Movement Along the Curve

A change in the product's own price causes a movement along the existing demand curve. A lower own price leads to a higher quantity demanded.

Shift of the Curve

A nonprice change shifts the whole curve. If consumers want more at every price, demand shifts right; if they want less at every price, it shifts left.

2. The Five Major Determinants

Five Nonprice Determinants

The main determinants are income, preferences, prices of related goods, expectations, and the number of buyers.

What a Determinant Does

Each determinant changes willingness or ability to buy at every current price. That is why it changes demand, rather than merely quantity demanded.

Use Context

The direction is not always automatic. For income, identify whether the product is normal or inferior. For related goods, identify whether they are substitutes or complements.

3. Income: Normal and Inferior Goods

Normal Goods

For a normal good, higher income increases demand. Consumers buy more at every price, so the demand curve shifts right.

Inferior Goods

For an inferior good, higher income decreases demand because buyers move toward alternatives they prefer. The demand curve shifts left.

Applied Example

If larger scholarships make students buy more meal delivery, meal delivery is normal for them. If they buy fewer generic noodles, those noodles are inferior for them.

4. Related Goods: Substitutes and Complements

Substitutes

Substitutes satisfy similar needs. When the price of coffee rises, some buyers switch to tea, shifting the demand curve for tea right.

Complements

Complements are consumed together. When game consoles become more expensive, fewer consoles are purchased, shifting demand for compatible games left.

Which Market Moves?

The price changes in one market, while demand shifts in the related-good market. Keep the two products and their curves separate.

5. Preferences and Expectations

Preferences

Preferences can change because of fashion, advertising, new information, habits, or social trends. Favorable preferences shift demand right; unfavorable ones shift it left.

Expected Future Prices

If buyers expect a product's future price to rise, they may purchase sooner. Current demand then shifts right, even before the actual price changes.

Expected Future Income

Expected income also matters. If consumers expect higher future income, current demand for many normal goods can increase.

6. Number of Buyers and a Reliable Method

Individual Demand Becomes Market Demand

Market demand combines all individual buyers. More buyers shift market demand right; fewer buyers shift it left.

Examples of More Buyers

Population growth, students returning to campus, or entry into a new region can increase the number of buyers and raise market demand.

Four-Step Method

Name the product, identify the change, classify the determinant, then state the outcome precisely: movement along, rightward shift, or leftward shift.

7. Worked Example: Campus Coffee

Own Price Falls

When the price of campus coffee falls, quantity demanded rises. This is a movement along the coffee demand curve, not a demand shift.

Tea Price Rises

If tea is a substitute and its price rises, some students switch to coffee. Demand for coffee shifts right.

Preference or Buyer Changes

A preference shift toward tea moves coffee demand left. Higher enrollment adds buyers and moves coffee demand right. Multiple changes may offset each other.

8. Practice: Diagnose the Shift

Your Turn

For each situation, identify the product being analyzed, the determinant, and the direction.

The price of movie tickets rises. What happens to demand for popcorn at movie theaters?
Consumers expect smartphone prices to be higher next month. What happens to current demand for smartphones?
The price of bicycles falls. What happens to quantity demanded of bicycles?

Write your answer in this format: `product | determinant or own price | outcome`.

Check Your Reasoning

`popcorn | complement price rises | demand shifts left`
`smartphones | expected future own price rises | current demand shifts right`
`bicycles | own price falls | movement along curve: quantity demanded rises`

9. Check Your Understanding

One-Question Check

Choose the most accurate conclusion.

The price of streaming devices falls. Assuming streaming devices and streaming subscriptions are complements, what happens in the market for streaming subscriptions?

Demand for subscriptions shifts right.
Quantity demanded of subscriptions rises along the existing demand curve.
Demand for subscriptions shifts left.
Supply of subscriptions shifts right.

Show Answer

Answer: A) Demand for subscriptions shifts right.

Streaming devices and subscriptions are complements. A lower device price encourages device purchases and increases demand for subscriptions at every subscription price. Therefore, the subscription demand curve shifts right.

10. Rapid Review

Flip Each Card

Use these cards to rehearse the language needed to explain a demand change precisely.

Demand: The quantities consumers are willing and able to buy at various prices, holding other relevant factors constant.
Quantity demanded: The amount consumers buy at one specific price. A change in the product's own price changes quantity demanded.
Demand shift: A rightward or leftward movement of the entire demand curve caused by a nonprice determinant.
Normal good: A good for which demand increases when consumer income increases.
Inferior good: A good for which demand decreases when consumer income increases.
Substitutes: Goods that can replace one another. A higher price of one tends to increase demand for the other.
Complements: Goods used together. A higher price of one tends to decrease demand for the other.
Consumer expectations: Beliefs about future prices, income, or conditions that can affect current demand.

Key Terms

demand: The relationship between a product's price and the quantities consumers are willing and able to buy, holding other factors constant.
complements: Products commonly used together; a price increase for one tends to decrease demand for the other.
normal good: A product for which demand rises when consumer income rises.
substitutes: Products that can satisfy similar needs; a price increase for one tends to increase demand for the other.
inferior good: A product for which demand falls when consumer income rises.
market demand: The total demand of all buyers in a market.
quantity demanded: The amount consumers are willing and able to buy at a particular price.
demand curve shift: A movement of the entire demand curve caused by a change in a nonprice determinant.
consumer expectations: Consumer beliefs about future prices, income, or market conditions that influence present purchasing decisions.