Graphical analysis assignment.
The given graph shows a shift of the demand curve to the right. This is an increase in demand. This change results due to influencing factors other than prices such as an increase of number of consumers and a positive change in terms of consumer taste and preference. A good example is DVD’s. In this case, let our original price of DVD’s be 40 and our original quantity demanded of DVD’s be 20. At a price of 50 a shift to the right causes the quantity demanded to increase from D1 to D2.i.e from 20 to 40 A shift to the left (opposite direction) of the demand curve may be caused by the following factors; a) Reduction of consumer income. In our example, if the income of consumers reduces, they will be forced to reduce the number of DVD’s they buy and thus a shift in the demand curve to the left. b) The price of substitute good decreases. If for instance we take an example of CD’s, we assume they are both used for the same purposes. If in any case the price of CD’s reduces thus becoming lower than that of DVDs, it is obvious that customers will opt to buy CD’s as compared to DVDs. This will result do a decrease of number of DVD’s sold and thus a shift to the left of the demand curve. c) Reduction of the number of buyers. If the number of buyers of DVDs decreases, this will result to a reduction in demand of DVDs and thus leading to a shift of the demand curve to the left. d) Increase of price of compliment goods. In our example, if the price of DVD players increases, it will lead to a reduction in demand of DVD players and thus a decrease in the number of DVD’s. This results a shift to the left of the demand curve. e) Negative changes in consumer tastes and preferences. If consumers changes their attitude to the type of DVDs to disliking them. The sale of the DVDs is likely to fall and thus this will lead to a shift o the demand curve to the left. The following factors...
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