Factors that Shift the Demand Curve (Edexcel IGCSE Economics)
Shifts Of The Entire Demand Curve
Spec point —
1.1.3b
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There are numerous factors that will change the demand for a good/service, irrespective of the price level
- Collectively, these factors are called the non-price determinants of demand
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Changes to any of these shifts the entire demand curve (as opposed to a movement along the demand curve) #### Diagram: Shift of the Demand Curve
Changes to any of the non-price determinants of demand shifts the entire demand curve left or right, irrespective of the price level
Diagram analysis
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For example, if a firm increases their Instagram advertising, there will be an increase in demand as more consumers become aware of the product
- This is a shift in demand from D to D1. The price remains unchanged at £7 but the demand has increased from 15 to 25 units
Explaining the Non-price Determinants of Demand
| Determinant | Explanation |
|---|---|
| **Advertising increases ** | - If more money is spent on advertising or branding, then demand for goods/services will increase as more consumers are aware of the product - There is a direct relationship between branding/advertising and demand - D shifts right (D → D1) |
| Changes in real income | - Real Income determines how many goods/services can be enjoyed by consumers - There is a direct relationship between income and demand for normal goods - Income increases - D shifts right (D → D1) |
| Changes in fashion/tastes | - If goods/services become more fashionable, then demand for them increases - There is a direct relationship between changes in taste/fashion and demand - Good becomes more fashionable - D shifts right (D → D1) |
| Changes in the price of substitute goods | - Changes in the price of substitute goods will influence the demand for a product/service - There is a direct relationship between the price of good A and demand for good B - For example, the price of a Sony 60" TV increases so the demand for LG 60" TV increases - Price of good A increases - D for good B shifts right (D → D1) |
| Changes in the price of complementary goods | - Changes in the price of complementary goods will influence the demand for a product/service - There is an inverse relationship between the price of good A and demand for good B - For example, the price of printer ink increases so the demand for ink printers decreases - Price of good A increases - D for good B shifts left (D → D2) |
| Demographic changes | - If the population size of a country changes over time, then the demand for goods/services will also change - There is a direct relationship between the changes in population size and demand - Demand will also change if there is a change to the age distribution in a country as different ages demand different goods/services e.g an ageing population will buy more hearing aids - Population increases - D shifts right (D → D1) |
Exam Hint The difference between a **movement along the demand curve and a shift in demand is essential to understand. **You will be repeatedly examined on this and it is important that you use the correct language to show that you understand the difference between a change in quantity demanded and a change in demand.
When** price changes (ceteris paribus), there is a movement** along the demand curve resulting in a change to quantity demanded. When a condition of demand changes, there is a shift of the entire demand curve, resulting in a change to demand.
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