Download Movements and shifts in demand and supply

AS/Year 1 Microeconomics
© Hodder & Stoughton Limited 2015
AQA A-level Economics
Movements and shifts in
demand and supply
In the ‘Individual demand 1’ column of your table, write down how many video
games you would buy each year at the different price levels.
Once you have done this, find out what everyone else in your class bought at the
different prices and fill in the ‘Market demand 1’ column of your table.
Price of
video game
Market demand 1
Task: Using the market demand data,
plot the demand curve for video games
with price on the y-axis and quantity on
the x-axis. Label it D1.
AS/Year 1 Microeconomics
© Hodder & Stoughton Limited 2015
£10
£20
AQA A-level Economics
Movements in demand
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As the last exercise demonstrated, price clearly affects demand for a product.
There are many non-price factors that also affect demand. Suppose your income
has doubled since you filled in the table. Write down how many video games you
will buy at each price now you are wealthier in the ‘Individual demand 2’ column.
Then fill in the ‘Market demand 2’ column.
Price of
video game
Market demand
1
Market demand 2
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£20
AQA A-level Economics
Shifts of demand
Task: Plot the second
demand curve on the
same diagram as D1.
Label this D2.
Extension: Can you
think of any other
factors that could
cause you to demand
more video games
when the price
remains unchanged?
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AS/Year 1 Microeconomics
© Hodder & Stoughton Limited 2015
3
Look at your two demand curves and remember how you constructed them.
Using D1, explain what is meant by a movement along the demand curve:
A movement along the demand curve shows how quantity demanded responds
to a change in price.
AQA A-level Economics
Movements and shifts
Using D1 and D2, explain what is meant by a shift of the demand curve:
A shift of the demand curve shows how demand responds to a change in
a non-price factor at any given price.
Extension answers — how many of the non-price factors did you guess
correctly?
• An increase in the price of computer games (price of substitutes).
• A decrease in the price of games consoles (price of complements).
• A successful advertising campaign for video games (tastes and fashion).
These three factors, in addition to income, represent the four non-price factors that
cause the demand curve to shift.
AS/Year 1 Microeconomics
© Hodder & Stoughton Limited 2015
4
You should now be able to apply what you have learnt about demand to movements
and shifts of the supply curve.
AQA A-level Economics
Applying this to supply
Task: Which diagram shows a movement and which shows a shift in supply?
Explain what is meant by a movement along the supply curve and a shift of the
supply curve.
Extension: Can you think of any factors which could cause the supply of a product
to change when the price remains unchanged?
AS/Year 1 Microeconomics
© Hodder & Stoughton Limited 2015
5
In each of the scenarios below, you need to decide:
• if supply or demand is affected
• if there is movement along or a shift of the curve
• the direction of the movement (extension/contraction) or shift (increase/decrease)
1 Market:
Event:
Answer:
Frozen pizzas
An increase in the price of frozen pizzas due to an increase in demand
A movement (extension) of the supply curve.
2 Market:
Event:
Answer:
Holidays to Majorca
There is a serious outbreak of food poisoning at a resort in Florida.
A shift (increase) of the demand curve.
3 Market:
Event:
Tablet computers
Suppliers drastically cut the price of tablets due to their costs of
production falling.
A movement (extension) of the demand curve.
Answer:
4 Market:
Event:
Answer:
AQA A-level Economics
Summary exercise
Alcohol
The government decides to increase the tax charged on alcohol.
A shift (decrease) of the supply curve.
AS/Year 1 Microeconomics
© Hodder & Stoughton Limited 2015
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