TOPIC: The Demand Curve
The determinants of demand and supply are the factors that affect the demand and the supply of a good. The determinants of demand are different from the determinants of supply. The only determinant however, that is common to demand and supply is price.
On the demand and supply curves, there can be either movements on the curve or a shift of the curve. Shifts are a result of changes in a non-price determinant. However, movements along any one of these curves are a result of changes ONLY in price.
Movement along the demand curve:
As the law of demand states, when the price of the good is high demand is low and vice versa. This can be depicted on the demand curve by a movement. This means that there exist an inverse or negative relationship between price and the quantity demanded - when the price of the good increases quantity demanded falls and when the price of the good decreases quantity demanded increases.
In the graph above, when the price of the good increases from $10.00 to $15.00, there is a movement up the demand curve from b to a. This causes the quantity demanded of the good to fall from 10 to 6. This we call a contraction in demand. There is an extension in demand however the price of the good has fallen from $15.00 to $10.00. As a result there is a movement down the demand curve from a to b. Quantity demanded has therefore increased from 6 to 10.
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