In this article, I want to show you how to graph a change in demand but first, it’s good to understand why demand can change and so I just want to give you a few examples. So demand could change of people’s income increases or decreases if there’s a change in people’s tastes and preferences or if there’s a change in the price of a substitute or a compliment for the good for example let’s say that if the price of natural gas is going down then that’s gonna affect demand for coal and the reason is that coal and natural gas can both be used to heat people’s homes and so they’re substitutes for one another.
So if the price of natural gas is going down natural gas is becoming cheaper and so then people will demand less coal and so what does it mean there’s an increase in demand. Well basically if there’s an increase in demand the demand curve is going to shift to the right and if there’s a decrease in demand it’s gonna shift to the left. So let’s just say we’ve got here’s our graph and we’ve got our demand curve it’s downward sloping
This is d1 and now if demand increases if we say, there’s a change in demand and demand increases what we’re saying is that this is gonna shift to the right and we’re gonna have an entirely new demand curve. Conversely, if it were to be a decrease in demand it would shift to the left. I want to give you an example it’ll make it a little bit easier to understand.
Let’s say that there’s a very famous musician in your country who begins wearing pink jeans. So they start wearing pink jeans everywhere they wear pink jeans to the Academy Awards to the Superbowl everybody sees them wearing pink jeans and so you could see where this would affect people’s tastes and preferences. Now because there’s a very famous musician this is increased demand for pink jeans. I want to show you what demand is for pink jeans before this happens before the musician starts wearing these pink jeans, we say that this is our demand schedule.
So at different prices, we can see what is the quantity of jeans demand. At $100 let’s say there are 12 units or 12 pairs of pink jeans however you want to think about it, there are 12 demanded at a price of $100. At a price of $200 the demand amount demanded would be 9 and I’ve got our demand curve, D1 is our demand curve before the musician starts wearing the pink jeans but again we said that there was an increase in demand so what does that mean, that means that this curve is going to shift to the right.
So how is it going to shift? Well at each price now there is a higher amount a higher quantity demand so at $100 before they demanded was 12 pairs of pink jeans but now it’s 15. At a price of $200 it was 9 jeans demanded now, it’s 12. So it’s increased after this musician has done that change in people’s preferences. Now they’re demanding more pink jeans at every single price. We need to shift our curve to the right and so what we’re gonna notice is that if we look at a price of $500, in the past they demanded zero but now they’re demanding three pairs of jeans. So that’s gonna put us right here (500, 3) and actually, if we were to map out this entire new quantity demand that would give us a new demand curve that is gonna look like D2.
So there’s our new demand curve and I’m gonna call that D2. So we remember that this is the second demand curve we had D1, which was our first demand curve. Now look this has shifted to the right you see how we have shifted the demand curve. So this is reflecting that we have had an increase in the demand for pink jeans. This is the market for pink jeans. You might be wondering you say “Well, that’s easy enough we have an increase in demand we shift the curve to the right.” Well, you might be thinking what happens to price and of the pink jeans and so forth? So to understand that what we’re gonna have to do is we’re gonna have to draw a supply curve. I’m just gonna draw a generic curve just to give you an idea of how it would affect the price of the pink jeans.
So here’s our supply curve. I’ll just call that S. Now our initial equilibrium was E1. So we’ll just call our equilibrium quantity is Q1 and then equilibrium price P1, that’s our initial price somewhere between two and three hundred dollars. Now because we have a new demand curve remember supply isn’t affected supply just stays the same. So now that it can be a new equilibrium. The new equilibrium is going to be here:
At the E2 point where the supply curve and the D2 intersect. Now we’re gonna have new Q2 and new P2 somewhere between three and four hundred dollars. So now what you see is that P2 is greater than P1 what does that mean? That means the price of the pink jeans has gone up. Pink jeans have become more expensive and we also see that Q2 is greater than Q1 that means that basically, people are now want to buy more pink jeans because they saw those famous musicians wearing the pink jeans and now they want some and then that has increased the price of the pink jeans, as we have shifted our demand curve to the right.