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    Movement shifts demand curve, changes supply/demand

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    Please explain in detail the difference between a movement along and shift of the demand curve.

    Show the impact on the equilibrium price and quantity that results from

    (1) an increase in demand

    (2) an increase in supply

    (3) an increase in both supply and demand

    Please provide an example of the role of supply and demand in decision making.

    I'm looking for no less than 1000 words to help me better understand.
    Kindly provide APA citations as necessary. Thank you!

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    Solution Preview

    Please explain in detail the difference between a movement along and shift of the demand curve.

    The demand curve shows a relationship between two variables, price and quantity. Algebraically we have P = a - bQ. Since the demand curve itself maps out the relationship between price and quantity and change in price leads to a change in quantity demanded. That is what we call movement along the curve. So a change in the price of a good always leads to movement along the curve. This is what the demand curve is. It establishes a relationship between the price of a good and the quantity that consumer(s) demand. We call this movement along the curve a "change in quantity demanded". This is not to be confused with a "change in demand". A change in demand means the demand curve has shifted. While it may seem common sense that a change in price will affect demand there are many other things that affect demand as well.
    For instance, if I have more income, that would affect my demand for a good. So we say, at a given price if income increases I will demand more of a normal good. This change in demand is caused by several things other than income including tastes, price and availability of other goods, etc. These are what we call the determinants of demand. They shift the demand curve. So, in general:
    • A change in the price of a good always leads to a "change in quantity demanded" i.e. movement along the demand curve.
    • a change in anything else that ...

    Solution Summary

    The movements and shifts of demand curve, and the changes in supply/demand are determined.

    $2.19