Economic Principles- Assignment

Running head: ECONOMIC PRINCIPLES
Economic Principles
Name of the Student
Name of the University
Author note

1ECONOMIC PRINCIPLES
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................4
Answer 3....................................................................................................................................7
Answer 4....................................................................................................................................8
Answer 5..................................................................................................................................11
Answer 6..................................................................................................................................12
References................................................................................................................................14

2ECONOMIC PRINCIPLES
Answer 1
Figure 1: Change in demand and change in quantity demanded for hats
(Source: as created by Author)
In economics, demand implies willing of buyers to buy something backed by their
purchasing power. Now demand for goods depend on a number of factors. Price is the
foremost important factor in determination of demand. Other factors influencing demand are
income, taste and preferences for the good, and price of the related good such as substitutes
and complementary good. Demand curve depicts the relationship between price and quantity
demanded of a good, keeping other factor constants. When price rises the demand for a good

3ECONOMIC PRINCIPLES
generally decreases (Kolmar, 2017). Similarly, when price decreases then quantity demanded
increases given other factors.
Change in quantity demanded reflects changes in demand because of a change in price. As
shown in the figure, when price of hat decreases from P1 to P2 then quantity demand for hats
increases from Q1 to Q2. Correspondingly, the points on the demand curve shift from A to
point B. A further decrease in price from P2 to P3 leads to a further increases in demand from
Q2 to Q3. The points on the demand curve again shifts from B to C. This represents change in
quantity demanded. Here, there is no change in the demand curve. There is movement along
the concerned demand curve from either left to right or right to left depending on the
movement of price. Change in quantity demanded assumes there is only a change in price and
income, taste and preferences or price of related goods remain constant.
Now, the concept of change in quantity demand is a narrow concept to capture
changes that demand for a good face. In real life, it is very much unlikely that all other factors
stay constant. The changes occur in demand due to factors other than price is called change in
demand. The expansion of demand is reflected from a rightward shift in the demand while
that of contraction in demand is seen by a leftward shift of the demand curve (Zinn et al.,
2016). In case of demand change there is a shift in the entire demand curve rather than
movement along the same demand curve.
Factors causing change in demand can be a increases or decreases in income. When
income increases then demand for a normal good increases and demand curve shifts outward.
Demand curve shifts inward for a decrease in income as demand generally decreases with
income. Another factor is taste and preferences. When preference for any good increases,
then demand also increases and shifts rightward.