INTERNATIONAL UNIVERSITY COLLEGE OF TECHNOLOGY TWINTECH

MICROECONOMICS

BBI 4413

INDIVIDUAL ASSIGNMENT

PREPARED BY:

YOGES A/L SIVAATMA

STUDENT ID NO:

BBAIB22610041

SUBMISION DATE:

10TH JUNE 2023

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 TABLE OF CONTENT
CONTENT PAGE
NUMBER
1.0 INTRODUCTION 3
2.0 FACTORS CAUSE SHIFT OF THE DEMAND CURVE 4-6
2.1.0 Income
2.2.0 Trends and Tastes
2.3.0 Populations
2.4.0 Price of Related Goods

3.0 CONCLUSION 7
4.0 REFERENCES 8

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 1.0 INTRODUCTION

The interest curve, first and foremost, shows the relationship between the money asked for a
specific period of time and the cost of a decent or administration in graphical form. In a typical
representation, the cost is on the left upward hub and the required quantity is on the level pivot.
Consequently, the interest rate curve reveals how much a good or service people are willing to
pay for it. However, we are aware that demand is not long-term stable. As a result, the interest
bend is constantly shifting left or right. Depending on the direction of the change, this translates
to either a decline in or an increase in popularity. A shift in the demand curve is when the price
stays the same, but some other unusual occurrence happens that pushes the demand schedule to
either increase or decrease at each price point. The five things we will learn about later in this
article are the different events that shift the demand curve. To understand what is a shift, let’s
first go over what a demand curve is in economics. A demand curve is a model that plots the
demand schedule for a specific good or service. As we can see in the below graph, the demand
curve details exactly how many units are wanted at each price. The difference in the quantity of
demand at each price is an outcome of the law of demand: as the price increases, people buy less.
Price, consumer interest, and supply are each factor that affect demand. These factors are further
influences by a consumer’s ability to purchase. In other words, they might desire to buy the
product but their income isn't at a level to do so. Therefore, pricing is changed to meet consumer
needs. This more affordable option will change demand and ultimately causes movement along
a specific demand curve happens.When a demand curve shifts, the quantity demanded by
individual buyers doesn't round out to the same amount. Essentially, a shift in a demand curve
looks at the market as a whole and establishes patterns.

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 2.0 FACTORS THAT CAUSE SHIFT OF DEMAND CURVE

FIGURE 1: EXAMPLE OF SHIFT DEMAND CURVE

2.1.0 INCOME

If someone's income goes up, that means they have more money to spend on buying goods or
services they need or simply enjoy. So, if the income level of many people goes up at the same
time, there will be a lot more money people will spend and the demand curve will shift to the
right. Think about what would happen if your salary increased, while the price of goods we enjoy
like ice cream which remains the same. Chances are you will buy more of that good ice cream
now that we have more money to spend. To sum up, if the income level of a population increases,
the demand curve will shift to the right, since there is more quantity of demand at every price
point. The opposite will happen if the income level drops. Now there will be less money to spend,
and the demand curve will shift to the left.

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Figure 2: Changes in demand curve (income)

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 2.2.0 TRENDS AND TASTES

As style and the desire to consume certain items increases or decreases, it will cause a shift
in the demand curve. For example, drinks that have a lot of sugar became less desirable in
recent years. That means the taste and the preference of consumers have changed. With this
change in demand, the demand curve for sugary drinks shifts to the left. If something has
become more popular recently, like electric vehicles, then that increase in preference will
cause a shift to the right.

2.3.0 POPULATION INCREASE OR DECREASE

The size of the current population directly affects the quantity of demand for all goods
and services at every price. When there is a growth in the population, the demand curve shifts
to the right, and when the population decreases, the demand curve shifts to the left.

2.4.0 PRICES OF RELATED GOODS

In economics there are two types of related goods:

• A substitute good
• A complementary good
A substitute good is exactly how it sounds. It is a good bought in exchange for another
product. If the price of one thing goes up, they will find something more affordable to
substitute for it. For example, we have one customer of our coffee shop who likes to buy a
donut along with their coffee every morning. One day, they notice that the price of donuts
went up, and they might buy a muffin instead. So the demand for muffins increased, although
the price stayed the same. As more people move away from the expensive item (the donut)
towards the cheaper item (the muffin), the demand for that cheaper item shifts to the right.
Also, the quantity of demand increases at each price point.

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 Figure 2: Changes of demand curve due to price goods

3.0 CONCLUSION

In conclusion, through this report, understanding the shift in the demand curve helps you make
more accurate forecasts about the demand for any good or service. Knowing when a shift in the
demand curve is likely to occur helps both buyers and sellers plan ahead. If the demand curve is
likely to shift to the right, then producers will have to prepare more goods to sell. Understanding
how these five events shift the demand curve also informs us about the broader economy.
Economists often combine the demand curves of all goods and services that are for sale to
understand broader economic trends. Thus, this also helps the student knowing when a shift is
likely to occur allows us to better understand broader economic trends. Demand curves can shift
from changes in income, preferences, or pricing. If the demand curve shifts right or left it will
affect the market equilibrium. Thus, this report also clearly explained, factors that shift a demand
curve left or right will directly affect supply and demand and the market equilibrium and shifts
in the demand curve must consider the product's place in the market as a whole.

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4.0 REFERENCES

Brinca, P., Duarte, J. B., & e Castro, M. F. (2020). Measuring sectoral supply and demand shocks
during COVID-19. Federal Reserve Bank of St. Louis, Research Division.

You, P. S. (2007). Optimal times of price reductions for an inventory model with partial backorder
and vertical shift demand. RAIRO-Operations Research, 41(1), 35-47.

Baker, J. B., & Bresnahan, T. F. (1988). Estimating the residual demand curve facing a single
firm. International Journal of Industrial Organization, 6(3), 283-300.

Lynch, M. Á., Nolan, S., Devine, M. T., & O’Malley, M. (2019). The impacts of demand response
participation in capacity markets. Applied Energy, 250, 444-451

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