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Question

Reasons for Shift in Demand Curve

Shifts in a price-demand curve may occur due to the change in one or more of other determinants of demand. Consider, for illustration, decrease in demand for commodity X by Q₁Q₂ giiven the price OP₁, demand for X might have fallen from OQ₂ to OQ₁ (i.e., by Q₁Q₂) for any of the below reasons:

• Fall in the consumer's income so that he can purchase only OQ₁ of X at price OP₂- it is income effect.
• Price of X's substitute falls so that consumers find it beneficial to substitute Q₁Q₂ of X with its substitute-it's substitution effect.
• Advertisement made by producer of the substitute, changes consumer's preference or taste against commodity X so much that they replace Q₁Q₂ of X with its substitute, again a substitution effect.
• Price of complement of X increases so much that they can now afford only OQX of X
• Also for such reasons as commodity X is going out of fashion; its quality has deteriorated; consumer's technology has so changed that only OQ₁ of X can be used and because of change in season if commodity X has only seasonal use.