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Learning why people might buy more or less of something even if the price stays the same.
Why did fidget spinners suddenly appear in every backpack in 2017, even though they weren't on sale? Sometimes, we want more of something even when the price stays exactly the same.
In economics, we must be careful with our words. A change in quantity demanded happens only when the price of the item changes. On a graph, you simply slide your finger up or down the existing line. However, a shift in demand happens when a 'non-price' factor changes. This causes the entire line to jump to a new position. Imagine the demand curve is a train track; a price change is the train moving on the track, but a shift is like picking up the whole track and moving it to a different city! We label the original curve and the new curve .
Quick Check
If the price of a taco drops from 2, is this a 'shift' or a 'movement along the curve'?
Answer
It is a movement along the curve because only the price changed.
Why do shifts happen? Two major reasons are Tastes and Income. Tastes refer to what is 'cool' or trending. If a famous influencer wears a specific brand of hat, the demand shifts right () because more people want it at every price. Income also matters. For most items, called normal goods, if you get a raise or a bigger allowance, your demand shifts right. However, for inferior goods (like generic brand noodles), you might actually buy less when you have more money, shifting that demand curve to the left!
1. A new movie features a character wearing bright neon sneakers. 2. Suddenly, everyone wants neon sneakers, even though they still cost D_1D_280Q_1Q_2$.
Demand can also shift because of what is happening to other products. We look at Substitutes and Complements. Substitutes are 'either/or' goods, like Coke and Pepsi. If the price of Pepsi goes up, people switch, shifting the demand for Coke to the right. Complements are 'together' goods, like printers and ink cartridges. If the price of printers becomes very expensive, people buy fewer printers—and therefore, their demand for ink cartridges shifts to the left, even if the ink price never changed!
Scenario: The price of a popular gaming console () drops significantly. 1. Because the console is cheaper, more people buy it (movement along the console curve). 2. Since you need video games to play on the console, games are complements. 3. The demand for video games shifts to the right (), 4. This happens even though the price of the games () stayed the same.
Quick Check
If the price of butter rises, what happens to the demand curve for margarine (a substitute)?
Answer
The demand curve for margarine shifts to the right.
Scenario: A tech company releases a new phone. Two things happen: 1. A report shows the phone battery lasts 3 days (Taste improves). 2. The economy enters a recession and people have less money (Income drops). 1. The battery report shifts demand to the right. 2. The lower income shifts demand to the left. 3. The final position of the curve depends on which factor is stronger! If the 'Taste' factor is bigger, the net shift is still to the right.
Which of the following would cause the demand for cereal to shift to the LEFT?
If is the original curve and is to the right of , what has happened?
If the price of hot dog buns rises, the demand for hot dogs (a complement) will likely shift to the left.
Review Tomorrow
Tomorrow, try to explain to a friend why a sale on hot dogs might actually help a company sell more mustard, even if the mustard isn't on sale.
Practice Activity
Find a news article about a product becoming 'viral' or 'banned.' Draw a quick graph showing which way the demand curve would shift based on that news.