0455
Demand
Allocation of Resources · 4 question types
| Movement along the demand curve | Shift of the demand curve | |
|---|---|---|
| What changes? | The good's own price | Any non-price factor (income, tastes, related goods, expectations, population, advertising) |
| What does the curve do? | Stays put | Moves to a new position |
| What do we call the change? | Extension (price ↓) or contraction (price ↑) | Increase in demand (rightward) or decrease in demand (leftward) |
| What changes on the diagram? | The point on the curve | The whole curve |
| Vocabulary | "change in quantity demanded" | "change in demand" |
Taxes and subsidies are a common trap here. An indirect tax or a subsidy on a good acts on producers, so it shifts the supply curve. The change in the price consumers then pay causes a movement along the demand curve (a contraction after a tax, an extension after a subsidy), not a shift of it. Taxes and subsidies are therefore not conditions of demand; they are covered in the Supply and Market equilibrium topics.