Supply and Demand Curve Basics

Shift Parameter is the term we use to describe a factor that causes either the supply curve or the demand curve to increase (shift away from the vertical axis) or decrease (shift towards the vertical axis).

Demand Shift Parameters	Supply Shift Parameters
Consumer Tastes and Preferences Consumer Income Prices of related goods (substitutes and compliments) Number of buyers Expectations concerning future price, availability and income	Costs of inputs Technology Prices of other producible commodities Number of sellers Expectations concerning the future

Vocabulary:
Ceteris Paribus is Latin for "holding other things constant." When used in conjunction with supply and demand analysis, those other things are the shift parameters.

A Change in the Quantity Demanded implies a move along the existing demand curve. It occurs only as a response to changes in price.

A Change in Demand implies a shift of the entire demand curve. It occurs as a result of a change in one of the shift parameters outlined below. The demand curve can increase (move to the right away from the vertical axis) or decrease (move toward the vertical axis.)

A Change in the Quantity Supplied implies a move along the existing supply curve. It occurs only as a response to changes in price.

A Change in Supply implies a shift of the entire supply curve. It occurs as a result of a change in one of the shift parameters outlined below. The supply curve can increase (move to the right away from the vertical axis) or decrease (move toward the vertical axis.)

Questions to test yourself...
1) What is the difference between a change in demand and a change in quantity demanded?
2) What is the difference between a change in supply and a change in quantity supplied?
3) How might you "go about" setting up, using and explaining your analysis?
4) What would make your analysis clear to any reader?

e-mail - Dr. Bradley K. Hobbs