Economic Analysis

Economic analysis
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Economic analysis
In economics the demand curve is a graph that represents the interrelation between the price of a particular commodity and the quantity that the consumers are in a position to acquire at a given price. The demand curve is plotted with the price on the vertical axis while the horizontal axis bears the quantities. The fact that the demand curve is normally slopped downwards from left to right shows that it has a negative association. The negative association implies that people tend to buy a product or service more often whenever the item price falls (Tieben, 2012). The function normally plotted in a demand curve is known as the inverse demand function.
Difference between Shift and Movement of a Demand Curve
A shift in the demand curve refers to a situation where the factor that affects demand is not change in price. This implies that the changes shall make a customer purchase less or more of a good even if the price is constant. The non-price elements of demand are those factors that affect the demand of a commodity even if the price of the particular commodity is constant. One aftermath of non-price elements of a demand curve is that it results into a new curve. An example of a situation where shift on the demand takes place is, when attending an outdoor event, the prevailing climatic condition can contribute towards one buying a drink or not (Prasch, 2008).
On the other hand, movement along a demand curve refers to a situation where an adjustment in price results into change in the quantity demanded by the consumers. Meaning the customers change their mind on the number of items to acquire because there has been an adjustment on the price of the commodity (Tieben, 2012).
Increase in Demand
The economy has on several occasions used the demand curve in understanding deeper the total quantity of goods produced and the various price rates. Demand for a particular commodity is said to increase when the customers’ inclination towards a particular good or service is on the rise. In case the demand for a particular commodity has increased and the supply for the good remains constant there will be some change in both equilibrium price and quantity. For starters, increase in demand leads to reduction in quantity of the commodity in the market this is due to the fact that several clients will be in need of the product. Similarly, equilibrium price will increase majorly because the craze for the good will m...