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In general, the only thing that can cause a movement along the demand curve is a change in a good’s own-price. A change in the value of any other variable will shift the entire demand curve. The former is referred to as a change in quantity demanded, and the latter is referred to as a change in demand.
More importantly, the shift in demand was both a vertical shift upward and a horizontal shift to the right. That is to say, for any given quantity, the household is now willing to pay a higher price; and at any given price, the household is now willing to buy a greater quantity. Both interpretations of the shift in demand are valid.
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Open itbut the intercepts have both increased, resulting in an outward shift in the demand curve, as shown in Exhibit 2.
Exhibit 2. Household Demand Curve for Gasoline before and after Change in Income
<span>In general, the only thing that can cause a movement along the demand curve is a change in a good’s own-price. A change in the value of any other variable will shift the entire demand curve. The former is referred to as a change in quantity demanded, and the latter is referred to as a change in demand.
More importantly, the shift in demand was both a vertical shift upward and a horizontal shift to the right. That is to say, for any given quantity, the household is now willing to pay a higher price; and at any given price, the household is now willing to buy a greater quantity. Both interpretations of the shift in demand are valid.
EXAMPLE 2
Representing Consumer Buying Behavior with a Demand Function and Demand Curve
An individual consumer’s monthly demand for dow Summary
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