3. Determinants of demand

3.1. More information on determinants of demand

Shifts in the demand curve versus movements along the demand curve 
When any of the determinants of demand apart from the price change the entire demand curve shifts. 
This is known as a "change in demand" as opposed to a change in the "quantity demanded" which is movement along the same demand curve. 
An increase in demand or a rightward shift of the demand curve is shown in Figure 

Figure 2.6: A rightward shift in the demand curve Figure 2.6 shows a rightward shift in the demand curve from DD to D1D1. An increase in 'demand' is therefore caused by a factor other than the commodity's own price. The commodity's price remains constant at P while the amount purchased has been increased from Q1 to Q2. 
This could be due to one or more of the following factors: 
An increase in the price of a substitute commodity 
A decrease in the price of a complementary commodity
An increase in a household's real disposable income.
A change of tastes or fashion in favour of a commodity
A successful advertising campaign
The increased availability of credit to consumers
Government legislation making the use of certain commodities such as fire extinguishers in cars mandatory. 
A decrease in demand or a leftward shift of the demand curve can be shown in the diagram below 


Figure 2.7 illustrates a leftward shift in the demand curve from D1D1 to D2D2. This implies that a factor other than the commodity's own price causes a decrease in demand. 
The commodity's price remains constant at P, while the amount purchased has been reduced from Q4 to Q3. 
This could result from one or more of the following factors:
A decrease in the price of a substitute commodity
An increase in the price of a complementary commodity
A decrease in a household's real disposable income
A change in tastes or fashion against a commodity. This could happen if, for example, a commodity goes out of fashion
A decreased availability of credit to consumers
Government legislation limiting the purchase of certain commodities such as firearms or prohibiting the purchase of commodities such as ivory or animal furs. 
A change in any of the determining factors of demand apart from price causes the demand curve to shift either to the left or to the right with more or less being demanded at each of the original prices. 
A movement along the demand curve occurs when a change in the amount purchased results from a change in the commodity's own price.
In the case of normal goods, an increase in the commodity's price leads to a 'contraction' along the demand curve or a decrease in the quantity demanded. 
In the case of normal goods, a decrease in the commodity's price leads to an increase in the quantity demanded or an 'extension' along the demand curve. 

In Figure 2.8 an increase the price from P1 to P2 leads to a reduction in the quantity demanded from Q2 after Q1 which effectively represents a movement from A to B along the demand curve.
The market demand for a commodity 
The market or aggregate demand for a commodity provides the alternative amounts of the commodity demanded per time period, at various alternative prices, by all the individuals in the market. 
Geometrically, the market demand curve for a commodity is obtained by the horizontal summation of all the individuals' demand curves for the commodity. 
The market demand for a commodity depends on all the factors that affect the individual's demand and, in addition, on the number of buyers of the commodity in the market. 
The greater the number of buyers of the commodity in the market, the larger will be the market or aggregate demand. 
Assume that a market for a particular commodity has two consumers, consumer 1 and consumer 2. 
The market demand for the commodity would be attained by summing up the individual demands of consumer 1 and consumer 2.
This can be illustrated in the diagram below:

In Figure 2.9 the market demand curve MD is obtained by summing up the individual quantities demanded by consumer 1 and consumer 2 at different prices. At price P1 consumer 1 demands a quantity Q1 whereas consumer 2 demands a quantity Q2. 
The relevant market demand quantity at price P1 is obtained by summing Q1 and Q2. At price P2 the relevant market demand is (Q3 + Q4).