What is the Difference between a movement along the demand curve and change in demand itself?

Answer 1

A movement along the demand curve is caused by a change in the products price. Thus, the quantity demanded at each price level is not different, but the price of the product is higher and thus less people are willing to buy it.

A change in demand itself is caused by a change in one of the determinants of demand. Thus, the quantity demanded at each price level is actually different. For example, if average income changes and people are generally making more money, they will be more willing to buy a given good. This means that a larger number of people will be willing to buy the good at the set price level, thereby changing the actual demand curve.

The determinants of demand include:

-A change in average income: as income goes up, people generally tend to buy more of a good, unless it is an inferior good which means that they will actually buy less (ex: second-hand clothing)

-A change in the price of other products, usually substitutes or complements. (ex: if the price of jam goes down, people will buy more bread)

-A change in consumer taste; advertising quality, health-scares, perception in the media. (ex: with the recent increase of awareness regarding global warming, people have bought more energy-efficient light bulbs)

-A change in the distribution of income (depending on which consumer's income changes, the demand for a good can change) ex: If the average income of farmers goes up, they may invest in more farm machinery such as tractors. However, if the average income of doctors goes up, the demand for tractors would not change.

-A change in population size and structure (ex: if a large proportion of the population moves from rural areas into the city, certain goods' demand will rise, and others will fall.)

-A change in expectations for the future (ex: If people expect much inflation in the future, they may rush to buy a certain good "now" while the price is still low)

-Seasonal demand (ex: the demand for ice-cream is much higher in the summer than it is in the winter)

*If any of the above determinants change, the actual demand for a specific good may also change.