Change in quantity demanded and a change in demand

Topics: Supply and demand, Coca-Cola, Money Pages: 2 (379 words) Published: March 10, 2014

Change in quantity demanded and a change in demand

Change in quantity demanded:
It’s movement along the curve .A change In price changes quantity demanded. Price never shifts the curve. For example take pepsi and cola:  If the price of Pepsi increase, you will buy less of them. However, if the price of Coke remains the same, you will purchase Coke instead of Pepsi – in this way your quantity demanded for Pepsi will decrease and the quantity demanded for Coke will increase).  Change in demand:

A change in demand is when the whole curve shifts. It is caused by factors other than the change in the price of the good (for example change in price of related good, change in tastes or preferences, change of income).  This can be caused when consumers realize that drinking soft drinks is not healthy and reduce the amount of soft drinks they drink. This will cause a decrease in demand of both Coke and Pepsi. (Source of examples: http://answers.yahoo.com/question/index?qid=20080922142143AAhEFvK) Usefull note http://edisc.economooc.com/?p=32

Difference between tax and subsidy

TAX:
A charge placed on the production of a good and service by the Government. For example petrol taxed heavily by the Government.

A tax will increase the cost of production to the producer. It’s make it more expensive to produce. It is likely that producer will produce less therefore the supply curve shifts to the left. It is also likely to increase the cost of the product. If people are really keen to buy the product (price inelastic) demand will still stay high. This often happens with alcohol, petrol and cigarettes

SUBSIDY:
This is a payment of money by the Government to a producer in order to encourage them to produce or supply a certain good service. For example an important bus route or Community Hospital

A subsidy will reduce the cost of production to the producer. It makes it cheaper to produce. It is likely that the producer will be...
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