The demand curve
isolates the impact that price has on the amount of a product purchased. A movement along a
specific demand curve shows a change in quantity demanded resulting from a change in
price.
d: Discuss the factors that cause a demand curve to shift.
Changes in consumer income: Consumers have more money so they can buy more of
everything.
Changes in the prices of related goods (substitutes and compliments): The price of
butter goes up, so consumers buy less butter and more margarine.
Changes in consumer expectations: Consumers expect the price of cars to rise next
month, so they buy a new car now before the price increases later.
Changes in the number of consumers in the market: As cities grow and shrink, and as
international markets open to domestic markets, the change in the number of customers
changes the demand curves of many products.
Demographic changes: In recent years, the number of people in the U.S. aged 15 to 24
declined by more than 5 million. This change will shift the demand curve to the left for such
things as jeans and pizza.
Changes in Market Demographics: Changes in the population can have a large influence in
markets. Population increases cause the curve to shift to the right.
Changes in consumer tastes and preferences: As consumer tastes and preferences
change, shifts in the demand curves for various products will shift.
e: Define short-run and long-run market equilibrium.
The short run is a time period of insufficient length to permit sellers to adjust fully to changes
in market conditions. Producers are only able to increase the supply of a good offered for sale
by using more labor and raw materials. New plant and equipment cannot be brought on line in
the short run. In the short run, the market price of goods will change in the direction that
brings the price which consumers are willing to pay into balance with the price at which
producers are willing to sell.
The long run refers to a time period of sufficient length to enable producers to adjust fully to
market changes. In the long run, producers have the time to alter their productive factors and
increase or decrease the physical size of their plants.
In the short run, the balance between the amount supplied and the amount demanded that
brings about market equilibrium is done by price alone. In the long run, production will
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