IB DP Economics - Unit 2 - Link -Study Notes - New Syllabus

Movements Along the Demand Curve and Shifts of the Demand Curve

In demand analysis, it is essential to clearly distinguish between a movement along the demand curve and a shift of the demand curve. These represent fundamentally different economic changes.

• Price change → Movement 
• Non-price change → Shift

Movement Along the Demand Curve (Change in Quantity Demanded)

A movement along the demand curve occurs when there is a change in the price of the good itself, with all other factors held constant (ceteris paribus).

• Only price changes cause movement along the curve.
• Represents a change in quantity demanded, not demand.
• Shown as movement from one point to another on the same demand curve.
• Caused by the income and substitution effects.

Types of Movement:

Extension in demand:

• • Occurs when price falls.
  • Quantity demanded increases.
  • Movement downward along the curve.

Contraction in demand:

• • Occurs when price rises.
  • Quantity demanded decreases.
  • Movement upward along the curve.

Important Insight:

• No new demand curve is formed.
• The relationship between price and quantity remains unchanged.

Same curve → Different point

Shift of the Demand Curve (Change in Demand)

A shift of the demand curve occurs when there is a change in any non-price determinant of demand, causing demand to change at every price level.

• Caused by factors such as income, tastes, expectations, prices of related goods, and number of consumers.
• Represents a change in demand, not just quantity demanded.
• The entire demand curve moves to a new position.

Types of Shift: 

Increase in demand:

• • Demand curve shifts to the right.
  • More is demanded at every price level.
  • Example: rise in income for normal goods.

Decrease in demand:

• • Demand curve shifts to the left.
  • Less is demanded at every price level.
  • Example: fall in consumer preferences.

Important Insight:

• A new demand curve is formed.
• The entire relationship between price and quantity changes.

New curve → Demand changes at all prices

Detailed Comparison

Common Exam Mistakes (VERY IMPORTANT)

• Confusing “increase in demand” with “increase in quantity demanded”.
• Forgetting that price changes never shift the demand curve.
• Not mentioning ceteris paribus when explaining movements.
• Mixing up direction of shift (right = increase, left = decrease).

Key Ideas:

• Price is the only factor causing movement along the curve.
• All other factors cause shifts.
• This distinction is fundamental for understanding market equilibrium.
• Always identify whether the question refers to price or non-price factors.