### 날짜 : 2024-03-23 15:39 ### 주제 : Shifts in Demand and Supply Curves #economics ---- ### 3.2 Shifts in Demand and Supply Curves Shifts in demand and supply curves are central to understanding the dynamics of markets in economics. These shifts represent how various external factors, aside from the price of the product itself, affect the quantity demanded by consumers and the quantity supplied by producers. #### Shifts in the Demand Curve A **shift in the demand curve** occurs when a factor other than the price of the good changes and affects consumer purchasing decisions, leading to a change in the quantity demanded at every price level. - **To the Right (Increase in Demand)**: When the demand curve shifts to the right, consumers are willing to buy more of the good at each price point than before. Reasons for this shift could include: - An increase in consumer income (for normal goods) - A rise in the price of a substitute product - A fall in the price of a complementary good - Changes in consumer tastes and preferences favoring the product - Expectations of future price increases - Population growth that increases the number of potential buyers  - **To the Left (Decrease in Demand)**: Conversely, when the demand curve shifts to the left, consumers are willing to purchase less of the good at each price point. This could happen due to: - A decrease in consumer income (for normal goods) - A decrease in the price of a substitute - An increase in the price of a complementary good - Changes in tastes and preferences against the product - Expectations that the product will become cheaper in the future - Population decrease or a change in demographics  #### Shifts in the Supply Curve  A **shift in the supply curve** refers to a change in the quantity that producers are willing to sell at each price point, prompted by factors other than the price of the product. - **To the Right (Increase in Supply)**: A rightward shift in the supply curve means producers are willing to offer more of the good for sale at every price point. This might be due to: - Decreased costs of production (raw materials, labor) - Technological advancements that improve efficiency - Subsidies provided by the government - Entrance of new producers into the market - Favorable weather conditions or natural factors (for agricultural goods) - Expectations of lower prices in the future, which motivate producers to sell more now - **To the Left (Decrease in Supply)**: A leftward shift means that less of the product is available from producers at each price level. Causes for this include: - Increased costs of production - Higher taxes or removal of subsidies - Natural disasters that damage productive capacity - Regulations or legal constraints - Exit of producers from the market - Expectations of higher prices in the future, which can lead producers to hold back current supply #### Movement Along Curves vs. Shifts It's important to distinguish between movements along a demand or supply curve and shifts of these curves. Movements along the curve occur when there is a change in the quantity demanded or supplied due to a change in the product's price. Shifts in the curve, on the other hand, are caused by changes in other factors and reflect a change in the quantity demanded or supplied at all price levels. ### Real-World Implications Understanding these shifts is crucial for businesses and policymakers because they can significantly affect market outcomes, including the equilibrium price and quantity. In response to these shifts, businesses might need to alter their production levels, pricing strategies, and stock inventories, while policymakers might need to consider potential regulations, subsidies, or taxes to stabilize the market. #### Demand Curve Shift Examples 1. **Increased Income and Gourmet Coffee**: Suppose there is an overall increase in income within an economy. Now that people have more disposable income, they desire more luxurious items. Consequently, the demand for gourmet coffee increases as consumers are willing to pay more for premium products. This is represented as a rightward shift in the demand curve for gourmet coffee. 2. **Health Concerns and Soda Consumption**: Imagine a major study links a commonly used sweetener in soda to health risks. Many consumers who hear about the study might avoid soda and consume less of it at any given price. This situation reflects a leftward shift in the demand curve for soda. 3. **Smartphones and Social Trends**: A social trend where the latest smartphone becomes a status symbol can make it highly desirable. More people want the latest model at any price, causing a rightward shift in the demand curve for the newest smartphones. #### Supply Curve Shift Examples 1. **Technological Advancements in Manufacturing**: If there's an introduction of new robotics technology that makes manufacturing more efficient, the producers of a good can supply more at every price because they're able to produce at a lower cost. The supply curve for these manufactured goods shifts to the right. 2. **Climate Effects on Agriculture**: Consider a severe drought that affects the production of oranges drastically reducing the harvest. Farmers now have fewer oranges to sell, regardless of the price. The supply of oranges shifts to the left, signaling a decrease in supply. 3. **Tariffs on Steel**: The government decides to impose heavy tariffs on imported steel. Manufacturers who use steel as an input face increased costs, leading them to supply less at every price point. This is illustrated as a leftward shift of the supply curve for goods made of steel. #### Combined Shift Examples Affecting Equilibrium 1. **Electric Cars (Demand and Supply Shifts)**: Electric cars have become more popular due to increased environmental awareness and government subsidies. The demand curve shifts to the right. Simultaneously, improvements in battery technology have reduced production costs for electric vehicles, shifting the supply curve to the right. The equilibrium quantity increases, but the change in equilibrium price depends on the relative magnitudes of the shifts. 2. **Music Streaming Services (Demand Shift)**: When music streaming services become the main way to listen to music due to their convenience and the demise of physical CD sales, the demand for music streaming subscriptions increases. This is a rightward shift in the demand curve for streaming services. 3. **Epidemics and Medical Supplies (Shifts due to External Shock)**: During an epidemic, the demand for medical supplies like face masks may surge, causing a rightward shift in the demand curve. However, if the epidemic disrupts the manufacturing of these supplies in affected countries, the supply curve may shift to the left due to decreased production capacity. The result is a significant increase in the equilibrium price of face masks while the effect on the equilibrium quantity depends on the extent of each shift.