A change in demand, or shift in the demand curve, occurs when consumers desire less or more of a product for some reason other than its price. This can be contrasted with a movement along a demand curve, which is a direct result of a product’s price. A change in demand can be caused by fluctuations in personal tastes and social fashions, which can result from preferences that are not easily predictable. It can also be caused by market conditions, such as the prices of related goods and the availability of credit.
A demand curve relates the desired quantity of an item to its price. In general, consumers desire more of a good when its price decreases. An exception to this rule can include products that are status symbols, such as luxury cars. Occasionally, more of these items are desired when their prices increase slightly. Regardless of consumers’ behavior, a demand curve plots their responses to a change in an item’s price.
While changes in the price of a good can move consumers along its demand curve, other external factors can shift the demand curve itself. Goods often become unfashionable for somewhat arbitrary reasons, and this can cause consumers to demand fewer of them. Popular singers, for example, can enjoy strong sales at the peak of their careers but weaker sales at other times. This change in demand for their albums is not primarily a result of changing prices, but rather a result of evolving tastes.
Another factor that can result in a change in demand is the availability of related goods. The demand for a good can increase when the price of substitute goods increase. If the prices for televisions of a particular brand increase, televisions of another brand may experience an increase in demand. The demand for a good can decrease, however, when the prices of complementary goods increase. If the prices of movies increase, televisions may see a drop in demand.
The availability of credit can also trigger a change in demand. Credit is a form of lending money whose availability and cost generally fluctuate based on market conditions. Car dealerships make extensive use of credit by offering to sell cars with extended payment plans. When availability credit falls, therefore, the demand for new cars tends to fall because consumers find themselves unable to pay upfront. The demand curve for cars is shifted even though there may be no change in a car’s final price.
