Distinguish between a movement along a demand or supply curve and a shift of the whole curve

What this dot point is asking

The syllabus wants you to distinguish clearly between a movement along a demand or supply curve and a shift of the whole curve. This is one of the most tested and most often confused ideas in the course. The big idea is simple: the good's own price causes a movement along the curve, while any other influence shifts the whole curve.

The answer

The single rule that decides everything

There is one rule to remember:

• A change in the good's own price causes a movement along the curve.
• A change in any other determinant causes a shift of the whole curve.

Getting this right is the difference between a correct and an incorrect answer, so it is worth memorising.

Movements along the demand curve

When the good's own price changes, you move from one point on the existing demand curve to another. This is called a change in quantity demanded:

• A fall in price causes a movement down the curve to a larger quantity demanded (an extension of demand).
• A rise in price causes a movement up the curve to a smaller quantity demanded (a contraction of demand).

Shifts of the demand curve

When a determinant other than the good's own price changes, such as income, tastes, population, or the price of a related good, the whole demand curve shifts. This is called a change in demand:

• An increase in demand shifts the curve to the right (more demanded at every price).
• A decrease in demand shifts the curve to the left (less demanded at every price).

Movements and shifts on the supply side

Exactly the same logic applies to supply:

• A change in the good's own price causes a movement along the supply curve, called a change in quantity supplied (an extension or contraction of supply).
• A change in another determinant, such as costs, technology or a tax, shifts the whole supply curve, called a change in supply.

The correct vocabulary

Using the right words shows the marker you understand the difference:

• Own-price change: a change in quantity demanded or quantity supplied (movement along).
• Other determinant: a change in demand or a change in supply (shift of the whole curve).

Examples in context

Example 1. A bubble tea promotion versus a health trend. A one-dollar-off promotion lowers bubble tea's own price, causing a movement along the demand curve to a higher quantity demanded. A new trend making bubble tea fashionable shifts the whole demand curve to the right. Same drink, two different diagram effects, because the causes are different.

Example 2. A fuel price rise versus a new refinery. A rise in the price of petrol causes a movement up the supply curve (a change in quantity supplied as refiners respond). A new refinery opening, which adds capacity, shifts the whole supply curve to the right (a change in supply). The cause decides whether it is a movement or a shift.

Try this

• Cue. State what causes a movement along the demand curve. A change in the good's own price, which causes a change in quantity demanded (an extension or contraction along the curve).

• Cue. State what causes a shift of the supply curve. A change in a determinant other than the good's own price, such as costs of production, technology, a tax or a subsidy, which causes a change in supply.

• Cue. Explain why a rise in consumer income shifts the demand curve rather than moving along it. Income is not the good's own price; it is held constant when the curve is drawn, so when income changes the whole curve must be redrawn, shifting it to a new position.