Question

How do you know whether a supply and demand problem is a problem that will show movement along the curve (slide) or a shift in the curve (shift factor)? How will you learn the difference between these two types of problems. What cues or tips you will you create to remind yourself how to identify the difference on a test question?

Answer 1

A shift of the demand or the supply curve or a movement along the demand or supply curve is actually very easy to predict.

A movement along the curve will occur for the factors that are related to price i.e. an increase in the price of goods will cause a movement along the demand curve. But a change in the other factors i.e. factors other than the price will shift the curve like a change in the taste, preference, income, price of the complement etc.

Similarly, for the supply curve of the change is in any other factor which is not related to price it will shift the supply curve like change in input cost, technology etc.

SO, the change in the quantity demand or supply or movement along the curve is related to price. Shifting of the curve is related to factors other than price.