If the price of a good increases what happens to demand? does a price create a curve shift?

Question

If the price of a good increases what happens to demand? does a price create a curve shift?

Answer 1

No.

The following is an illustration of the demand curve:

http://www.freeworldacademy.com/newbizza...

As you can see, quantity demanded is on the horizontal axis and the price is on the vertical. If the price changes (i.e. decreases), this causes a MOVEMENT along the curve, resulting in the consumer buying more goods.

A shift in the demand curve implies that consumers buy more goods at each price. Factors that can shift the demand curve:

1. Number of buyers

2. Expectations

3. Tastes

4. Income

5. Price of substitutes/complements

If, for example, a consumer develops diabetes, this will cause a shift in the demand curve for them, since they're willing to pay more at each quantity.

As for the poster who talked about oil--you need to be careful, since the price itself is not responsible for the shift. What is happening is that as price increases, not only does demand go down, but as people buy more fuel efficient cars/start using public transportation, it causes a shift, because they're willing to pay less for each amount of oil. This is a change in tastes, not price.

Answer 2

No it does not.

Non-price determinants of demand (e.g. substitutes, buyer's income, etc) would cause a shift in the demand curve. However, price alone causes a movement in the demand curve. If the price of a good increases, the demand is less and there is a movement along the demand curve to a point where the price is higher and less quantity is demanded.