When we talk about the law of demand, we always use a Latin phrase, ceteris paribus, which means ‘all other conditions remaining constant’. These ‘all other conditions’ refer to anything that might affect the purchase behaviour of the buyers even if the price of the products or services remains constant.
When any of these conditions changes, there occurs a change in the demand curve i.e., a shift of the entire demand curve to a new position. Such shift of the entire demand curve is referred to as ‘change in demand’.
In other words, change in the independent variables [except Price (P)] might change the shape and/or the position of the demand curve. Thus, when we use the expression, ‘change in demand’, we mean of shift in the entire demand curve.
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A change in demand, i.e. shift of the entire demand curve, reflects change(s) in non-price determinant(s) of demand. Non-price determinants include price of substitutes, price of complementary product(s), tastes and preferences, income level of the customers, etc.
For instance, if income level of the existing customers increases, the entire demand curve shifts in the rightward (or upward) direction i.e. from DD to D’D’ as shown in figure 3.2.
Figure 3.2 indicates that, for every price level, the demand is increased. We observe that, previously at P0 price, ‘ow’ quantity could be sold. Now, as the income level of the consumers has increased, we can assume that the purchasing power of the consumers has also increased.
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Hence, at P0 price, consumers will now demand more (say, ‘ox’ units). Not only for P0, but also for each and every price point (i.e., for each and every point on the vertical asis) this change will take place, which ultimately results in a shift of the demand curve from DD to D’D’.
Similarly, a leftward (or downward) shift of the demand curve could be termed as ‘decrease in demand’. This decrease in demand is caused by lack of demand of the product at each and every price level, which might be the result of a fall in disposable income of the existing customers.
We have shown that changes in non-price determinants lead to ‘change in demand’. In contrast, fluctuations in price, another determinant of demand, cause movement along the demand curve. This is referred to as ‘change in quantity demanded’. For example, assume that 10 pens can be sold at Rs. 10 each.
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Since price and quantity are oppositely related, decrease in price from Rs. 10 to Rs. 7 results in increase in demand. This change in demand is known as change in quantity demanded. This change causes a movement along a demand curve, which is represented here by a movement from point A to B (see figure 3.3) along the demand curve DD.