2 What is the law of demand, and how do we illustrate it? If the price of a good remains constant but some other influence on buyers’ plans changes, there is a change in demand for that good. We illustrate a change in demand as a shift of the demand curve. For example, if more people work out at the gym, consumers buy more energy drinks regardless of the price of a drink. That is what a rightward shift of the demand curve shows – more energy drinks are demanded at each price.

In Figure 3.3 , there is a change in demand and the demand curve shifts when any influence on buying plans changes, other than the price of the good. Demand increases and the demand curve shifts rightward (to the red curve D1 ) if the price of a substitute rises, the price of a complement falls, the expected future price of the good rises, income increases (for a normal good), expected future income increases, or the population increases.

Demand decreases and the demand curve shifts leftward

(to the red demand curve D2 ) if the price of a substitute falls, the price of a complement rises, the expected future price of the good falls, income decreases (for a normal good), expected future income decreases, or the population decreases. (For an inferior good, the effects of changes in income are in the direction opposite to those described above.)