Demand and Supply: Distinguish a Curve Shift from Movement Along It

Demand and Supply: Distinguish a Curve Shift from Movement Along It

A larger quantity does not always mean that a curve has shifted. If notebooks become cheaper while all other relevant factors stay unchanged, buyers move to another point on the same demand curve. If more buyers enter the market and want notebooks at every given price, the demand curve itself changes. The quickest check is to ask what happened to quantity at the same price.

Everything below is an invented classroom notebook market. The quantities, prices and changes are supplied teaching data, not observations of a real school or predictions of current prices. Each quantity is measured per week, and every notebook is assumed to be the same product. These examples explain a model; they are not personal financial advice.

Read the schedule before drawing

Quantity demanded means how many notebooks buyers are willing and able to purchase at a stated price during the week. Quantity supplied means how many sellers are willing and able to offer at that price during the same period. A whole demand or supply schedule lists these quantities across prices. Do not confuse the schedule with one quantity in a single row.

All four quantity columns mean notebooks per week. Use D0 with S0 for the baseline, D1 with S0 for the demand change, and D0 with S1 for the supply change. The last two columns are not changes happening together. Joining the plotted points by straight segments is part of this classroom model.

Analysed case 1: find the original equilibrium

Put price on the vertical axis and weekly quantity on the horizontal axis. Use the same scale for all three graphs: quantity from 0 to 160 in steps of 20, and price from KSh 0 to KSh 70 in steps of 10. A table row with price 20 and quantity demanded 100 becomes the graph point (100, 20), because coordinates give horizontal quantity first.

At KSh 40, buyers demand 60 and sellers supply 60. The quantities match, so E0 is the baseline equilibrium. At KSh 30, demand is 80 and supply is 40: excess demand is 40 notebooks per week. At KSh 50, demand is 40 and supply is 80: excess supply is 40. Calculate the gap using quantities from the same price row.

In this simple adjustment model, excess demand creates upward pressure on price and excess supply creates downward pressure. The intersection is a model’s matching point, not a statement that KSh 40 is fair, affordable to everyone or guaranteed to occur in a real market. It also does not show that all desired notebooks will be available at every other price.

Analysed case 2: an own-price movement

Suppose the notebook price falls from KSh 50 to KSh 30, with demand determinants unchanged. On D0, quantity demanded rises from 40 to 80. This is a movement down and to the right along D0, often described as an extension of quantity demanded. The demand schedule has not changed: both points were already on it.

With supply determinants also unchanged, quantity supplied moves from 80 to 40 along S0. A price change can therefore produce movements along both unchanged curves. It does not itself shift demand or supply. This comparison does not claim that both prices are equilibria; at KSh 30 the original schedules show excess demand.

A useful sentence is: “The product’s own price fell, so quantity demanded increased along the existing demand curve, other relevant factors held constant.” Naming the cause prevents the vague statement “demand went up” from hiding the distinction.

Analysed case 3: more buyers shift demand

Now return to the original equilibrium. Suppose additional buyers enter this fictional market. The task specifies that total demand increases by 40 notebooks per week at each listed price. Sellers’ production conditions are unchanged, so retain S0. This is a new demand schedule, D1, rather than movement between two rows of D0.

At the original KSh 40 price, D1 is 100 while S0 is 60. That excess demand of 40 shows why KSh 40 is no longer the matching price. Check KSh 50: both D1 and S0 equal 80. The new equilibrium has a higher price and a higher quantity. Sellers reach that new point by moving along S0; their supply curve has not shifted.

The horizontal arrow compares D0 quantity 80 with D1 quantity 120 at the same price of KSh 30. It illustrates the shift test, not the equilibrium change. The equilibrium points must be found where the relevant demand and supply curves cross.

Analysed case 4: lower costs shift supply

Reset to D0 and S0 again. In this separate experiment, improved production methods lower the cost of making notebooks. The task specifies that sellers now offer 40 additional notebooks per week at each listed price. Keep D0 unchanged and replace S0 with S1.

At KSh 40, S1 is 100 while D0 is 60, creating excess supply of 40. At KSh 30, both equal 80. The new equilibrium price is lower and equilibrium quantity is higher. Buyers move along D0 as price adjusts; a lower equilibrium price has not shifted the demand curve.

The horizontal arrow at KSh 50 compares original supply of 80 with new supply of 120. A rightward supply shift means more supplied at a given price. Do not judge its direction only by whether one part of a sloping line appears higher or lower on the page.

Three causal scenarios: what can you conclude?

• The notebook’s own price rises, with everything else held constant. Use movements along the existing curves. The cause is the price shown on the vertical axis.
• Paper used to produce notebooks becomes more expensive, with other factors unchanged. In the usual upward-sloping supply model, higher production costs shift supply left. Do not shift notebook demand merely because a seller’s input price changed.
• The number of notebooks sold rose last week. This alone is insufficient. It could reflect a price movement, a demand shift, a supply shift or combined changes. Ask what happened to prices and the underlying conditions before choosing a diagram.

The size of a shift cannot be inferred from its cause alone. The increase of 40 in our graphs was explicitly supplied. Without a new schedule or equivalent information, explain the expected direction under stated assumptions rather than inventing a numerical equilibrium.

Three solved practice tasks

1. Task: Plot the baseline supply point at KSh 60 and find excess demand or excess supply at that price.

   Answer: S0 quantity is 100, so plot (100, 60). D0 is 20. Excess supply is 100 − 20 = 80 notebooks per week. The difference is a quantity, not KSh 80.

2. Task: A learner uses D1 and S1 together to give the answer for Graph B. Explain the error and correct it.

   Answer: Graph B changes demand only. Supply remains S0, so use the row where D1 = S0 = 80, at KSh 50. Combining D1 with S1 introduces a second change that the question did not authorise.

3. Task: In a fresh variation, demand falls by 40 at every listed price where the result is non-negative. Supply remains S0. Find the intersection within those valid rows.

   Answer: At KSh 20, new demand is 60 versus supply 20. At KSh 30, new demand is 40 and supply is 40. Thus the new equilibrium is KSh 30 and 40 notebooks per week. At KSh 40 and 50, demand would be 20 and 0. Exclude KSh 60 because subtracting 40 from 20 gives an invalid negative quantity for this schedule.

Frequently asked questions

The movement-versus-shift distinction is also explained in OpenStax’s discussion of demand and supply changes. For other tasks, browse the Business Studies topical revision collection; some resources may require membership.