3.5 shifts in the demand curve

• Movement Along the Demand Curve: When the price of the good itself changes, leading to more or less being bought at different price points.
• Shifts in the Demand Curve: When external factors (not price) cause the entire demand curve to shift. This results in more or less of the good being demanded at every price point.
• a rise in the price of a substitute causes a rightward shift in the demand curve.

  • As the price of substitutes rises, consumers buy more of the other good, increasing its demand at every price level
• Comparative Statics:

  • The concept of comparing the old and new equilibrium positions to see how external changes affect the market.
• the rise in the price of a substitute leads to excess demand, causing prices to rise until the market reaches a new equilibrium.
• Economic Mechanism:

  • Explains the self-correcting behavior of markets when there is excess demand or supply.
• • Excess demand: Puts upward pressure on prices.
  • Excess supply: Puts downward pressure on prices.
• inferior goods : Goods for which demand decreases as income rises
• giffen goods : Non  luxury Goods for which demand increases as price increases 
• veblen goods : High quality (exclusive) goods for which demand increases as the price increases
• normal goods: Goods for which demand rises as income rises