A rise or fall in consumer demand even though prices remain the same can be represented by a shift in the demand curve. For example, if a soft drinks company keeps its price the same at P1 but runs a major advertising campaign, its demand curve could shift to the right as sales rise from Q1 to Q2.
P P1 0 Q2 Q1 Q
Similarly, if a product becomes unfashionable or was involved in a health scare, its demand curve could shift to the left, indicating a fall in demand from Q1 to Q2 even though its price has remained the same at P1.
Movements along and shifts in demand curves • Movement along a demand curve is always caused by a change in the price of the product. As the price rises or falls the quantity demanded will also change.
• Shifts in demand curves are caused by all other factors (but not changes in the price of the product). Changes in advertising, disposable incomes, government regulations, natural causes and population changes can cause the entire demand curve to shift even though the price remains unchanged.
LO 3.1 3.3 3.10
2. What factors influence the demand for goods and services?
Advertising and fashion trends
Factors
Government taxes and regulations
that can affect demand for a product
Natural causes and population changes
Disposable incomes and interest rates
P
P1
0
Q1
Q2
Q
Prices - including prices of substitute and complementary goods
