Research Paper: Analyzing Factors Causing Shifts in the Demand Curve

This essay provides a comprehensive analysis of the factors that cause shifts in the demand curve, drawing upon three articles that examine the effects of various market conditions on different types of goods. The essay begins by summarizing the objectives, content, and findings of each article, hi...Read More

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Introduction
The first article “Shift in Demand Curve: Increase and Decrease” talks about the shift in
the demand curve describing the increase and decrease in the demand curve. The data used to
study the behavior of the demand curve was derived from any commodity in the market. The
findings in the article reveal different reasons that can cause the shift of the demand curve in the
market. Some of these reasons include price fluctuation of the substitute goods, consumer’s
income change, tastes and preferences changes, future expectations of price changes, and
seasonal changes among others (Chand). It concludes that the shift in the demand curve can’t
shift on the same curve but it has to relocate either on the right side or left side of the original
demand curve.
The second article “Effect of Demand Curve on Normal Goods and Inferior Goods”
examines how various demand determinant factors affect the demand curve for both the normal
and inferior goods. The information to study in this case is derived from the normal goods and
inferior goods. The most vital factor for this research is the consumer’s income. The demand for
normal goods tends to increase with an increment in consumer income level whilst the inferior
goods demand tends to decrease as the consumer’s income level increases and vice versa. This,
therefore, indicates a directly proportional relationship between normal goods demand and
consumer’s income level and an inverse relationship between inferior goods demand and

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consumer’s income level. Apart from the income of the consumers, there are other factors that
affect the demand curve of these goods. These factors may include change of the prices of the
substitute and complementary goods, change of the tastes and preferences of the goods,
population size, and expectational change of prices in the future among others (Chand). It
concludes that the demand curve can have an effect in the shift of its original position. This can
either shift in the right side or on the left side of the original demand curve (Chapman, Archie
and Verbič 158).
The third article “Effect of Demand Curve on Substitute Goods and Complementary
Goods” explains how various demand determinant factors affect the demand curve for both the
substitute and complementary goods (Costinot, Arnaud and Rodríguez-Clare 3). Coffee and tea
are examples of substitute goods while coffee and sugar are complementary goods given to
illustrate the effects of the demand curve in the article. The demand for a given good has a direct
proportion relationship with the price of its substitute good in the market (Chand). On the other
hand, the demand for good has an inverse relationship with the price of its complement. In this
case, demand is not affected by the price changes of unrelated goods in the market. It also finds
that cross demand can either be negative or positive depending on the kind of change in prices of
the related goods. Price change of the substitute and complementary goods is the only factor
considered to bring the effect of the demand curve of the two different kinds of goods
(Jadidzadeh, Ali and Serletis 66). It concludes that the effect of the demand curve on both goods
can either be on the right side or left the side of the original demand curve.
Body

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From the three articles, there are similarities in the findings and conclusion in each case.
The articles show that the shift in the demand curve is caused by a number of different factors in
the market. Regardless of the type of commodities in the market, changes in prices of either a
substitute good or complementary good make the demand curve shift (Knittel, Christopher and
Pindyck 85). The articles illustrate clearly that, the demand curve changes its original position
after either decrease or increase in the demand of any commodity in the market. The diagrams
below illustrate the shifts in different occasions.
Increase in the demand curve
Fig 1.
Increase in demand for a commodity is caused by any other factor favoring demand but
not its own price of the commodity. From the three articles, an increase in demand makes the
demand curve to relocate its original position to another position. This results from a shift
towards the right direction by the demand curve as shown in Fig 1. above. The quantity

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demanded increased from Q units to Q1 units at the same price of $P, resulting in a rightward
shift of the demand curve from DD to D1D1. On the other hand, the demand for a commodity can
decrease due to other unfavorable factors of demand i the market. A decrease in demand makes
the demand curve to shift to the left side of the original demand curve. Fig 2 below illustrates
that graphically. When the quantity demanded decreases from Q units to Q1 units at the same
price of $ P, results in a leftward shift of the demand curve from DD to D1D1.
The decrease in the demand curve
Fig 2.
There are many reasons that can lead to a demand curve shift. Some of these reasons
(factors) includes; change of the prices of the substitute goods and services, change of prices of
the complementary goods and services, future expectation of price changes, changes in the tastes
and preferences of goods and services, income distribution of the consumers, seasonal changes,
population changes and national calamities and disasters (Gilboy and Waterman 121). These

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factors do change in sometimes where some may be favorable or unfavorable to demand of a
certain commodity in the market.
The findings from the three articles show that the above factors affect the shift in the
demand curve under various circumstances or conditions. They proved the factors by comparing
a different kind of goods in the market ranging from normal goods to inferior goods (Beaudry,
Paul, Green, and Sand 199).
SWOT Analysis
For the SWOT analysis, only the strengths and weaknesses have been highlighted for the
three articles as the topic is just about the causes of shifts in demand curve and this does not have
opportunities and threats.
From various articles, considering the point of strengths, the identified goods have been
clearly explained and the factors which cause shifts in their demand curve identified. The various
goods include inferior and normal goods, and complementary and substitute goods. Their graphs
and also the direction of shift based on the effect of the determinant factor have also been shown.
Considering the weaknesses point, each article only bases its discussion based on certain
goods and services except the first article which generally discuses about the shifts in demand
for all goods. For instance, the second article only discusses about the causes of shifts in demand
curve for normal and inferior goods while the third article bases its discussion on the substitute
and complementary goods. All these could have just been covered under one discussion instead
of choosing specific goods in order to enable the reader to have an overall knowledge which is
not limited to specific areas of study.
Conclusion

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In conclusion, I do agree with the findings in each article on the causes of the shift in the demand
curve. We can’t undermine those factors in the market if we wish to determine the scope of the
demand of certain commodity in any given country. When making a decision on what
commodity should be introduced in a market, then the mentioned factors have to be considered
and how will going to affect the new commodity in the market (Dubé, Jean-Pierre, Hitsch and
Rossi 22). Governments use the same factors to determine how to set the tax rates on a certain
commodity based on the amount of revenue they want to collect. The demand theory assists the
government to regulate the consumer usage of certain commodities especially the one harmful in
human consumption.

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Works Cited
Beaudry, Paul, David A. Green, and Benjamin M. Sand. "The great reversal in the demand for
skill and cognitive tasks." Journal of Labor Economics 34.S1 (2016): S199-S247.
Chapman, Archie C., and Gregor Verbič. "An iterative online auction mechanism for aggregated
demand-side participation." IEEE Transactions on Smart Grid 8.1 (2017): 158-168.
Costinot, Arnaud, and Andrés Rodríguez-Clare. "The US gains from trade: Valuation using the
demand for foreign factor services." Journal of Economic Perspectives 32.2 (2018): 3-24.
Dubé, Jean-Pierre, Günter J. Hitsch, and Peter E. Rossi. "Income and wealth effects on private-
label demand: evidence from the great recession." Marketing Science 37.1 (2018): 22-53.
Gilboy, Elizabeth Waterman. "Demand as a Factor in the Industrial Revolution." The Causes of
the Industrial Revolution in England. Routledge, 2017. 121-138.
Jadidzadeh, Ali, and Apostolos Serletis. "How does the US natural gas market react to demand
and supply shocks in the crude oil market?." Energy Economics 63 (2017): 66-74.
Knittel, Christopher R., and Robert S. Pindyck. "The simple economics of commodity price
speculation." American Economic Journal: Macroeconomics 8.2 (2016): 85-110.
Smiriti Chand. “Effect of Demand Curve on Normal Goods and Inferior Goods |
Microeconomics.” Your Article Library, 22 Sept. 2013,
www.yourarticlelibrary.com/economics/effect-of-demand-curve-on-normal-goods-and-
inferior-goods-microeconomics/8916.
Smiriti Chand. “Effect of Demand Curve on Substitute Goods and Complementary Goods |
Micro Economics.” Your Article Library, 3 Dec. 2013,
www.yourarticlelibrary.com/economics/effect-of-demand-curve-on-substitute-goods-
and-complementary-goods-micro-economics/8914.

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Smiriti Chand. “Shift in Demand Curve: Increase and Decrease | Microeconomics.” Your Article
Library, 3 Dec. 2013, www.yourarticlelibrary.com/microeconomics/shift-in-demand-
curve-increase-and-decrease-microeconomics/8936.
Links for the articles
http://www.yourarticlelibrary.com/economics/effect-of-demand-curve-on-substitute-goods-and-
complementary-goods-micro-economics/8914
http://www.yourarticlelibrary.com/economics/effect-of-demand-curve-on-normal-goods-and-
inferior-goods-microeconomics/8916
http://www.yourarticlelibrary.com/microeconomics/shift-in-demand-curve-increase-and-
decrease-microeconomics/8936