From Market News to a Demand Graph
Economic news describes events in words: a product becomes cheaper, a related product becomes more expensive, or buyers’ circumstances change. A demand graph is a compact way to show what those events mean for buyers’ planned purchases. The key is to identify what changed before moving or drawing any curve.
A demand schedule lists the quantity buyers are willing and able to purchase at each stated price, with other relevant conditions held fixed. A graph plots those price-quantity combinations. Translating news accurately requires separating a change in the good’s own price from a change in another determinant of demand.
In the standard graph, the vertical axis shows the good’s own price \(P\), and the horizontal axis shows quantity demanded \(Q_d\). A demand schedule provides points \((Q_d,P)\). When the good’s own price changes and other determinants stay fixed, the plotted point moves along the same curve. When a nonprice determinant changes, the schedule changes: at each given price, buyers plan to purchase a different quantity, so the demand curve shifts.
How to Translate a Schedule
For a schedule, read each row as one price paired with the quantity buyers plan to purchase at that price. For a graph, put each pair on the axes with quantity on the horizontal axis and price on the vertical axis. If a price is given first, find its quantity in the schedule and plot that single point. If several price-quantity pairs are provided, plot them and connect them as a demand curve, provided the problem asks for a graph and the points follow the usual downward-sloping pattern.
A linear demand equation can make the translation quicker. For example, \(Q_d=120-5P\) gives quantity demanded directly for any stated price. The equation describes a schedule only under its stated conditions; if a nonprice determinant changes, the original equation no longer describes the new demand schedule.
Worked Example: A Lower Own Price and a Demand Schedule
A neighborhood market uses the demand equation \(Q_d=150-6P\) for a particular weekly snack box, where \(P\) is dollars per box and \(Q_d\) is boxes per week. Other conditions are unchanged. The posted price falls from $20 to $15. Construct a short schedule, calculate the quantities at both prices, and state the correct graph label.
Method. Substitute each price into the same demand equation, because the news changes the good’s own price but does not change a nonprice determinant.
At \(P=10\), \(Q_d=150-6(10)=150-60=90\). At \(P=15\), \(Q_d=150-6(15)=150-90=60\). At \(P=20\), \(Q_d=150-6(20)=150-120=30\). At \(P=25\), \(Q_d=150-6(25)=150-150=0\).
| Price per box, \(P\) | Quantity demanded per week, \(Q_d\) |
|---|---|
| $10 | 90 |
| $15 | 60 |
| $20 | 30 |
| $25 | 0 |
At the old price of $20, quantity demanded was \(150-6(20)=30\) boxes. At the new price of $15, it is \(150-6(15)=60\) boxes. On a graph, plot the old point \((30,20)\) and the new point \((60,15)\), where each ordered pair is \((Q_d,P)\). The point moves down and to the right along the same demand curve. This is an increase in quantity demanded, not an increase in demand.
Check. Substitution gives 30 boxes at $20 and 60 boxes at $15, matching the schedule. The common mistake to avoid is calling the lower-price response a rightward shift; no curve shift is implied when only own price changes.
Showing a Demand Shift in a Schedule
A nonprice event changes the quantity buyers plan to purchase at a given price. The most direct way to show the change is to compare the old and new quantities at the same prices. If the new quantity is greater at each price in the schedule, demand has increased and the new curve is to the right of the old curve. If it is lower at each price, demand has decreased and the new curve is to the left.
For a simple linear schedule, the shift can appear as a change in the quantity intercept. For example, \(Q_d=200-4P\) and \(Q_d=240-4P\) have the same response to price in the equation, but the second schedule gives 40 more units at every price where both quantities are nonnegative. This is a rightward shift, not a movement along the original curve.
Worked Example: Lower Price of a Complement
A firm sells replacement filters for a home air-cleaning device. Initially, weekly market demand for filters is \(Q_d=180-3P\), where \(P\) is dollars per filter. The price of a compatible device falls, and analysts estimate that this change raises filter demand by 30 filters per week at every given filter price. Find the old and new schedule quantities at \(P=20\), \(P=30\), and \(P=40\), then describe the graph.
Method. The filter’s own price is held constant in each comparison. The stated 30-unit increase is therefore added to the old quantity at each price to construct the new schedule: \(Q_{d,\text{new}}=(180-3P)+30=210-3P\).
At \(P=20\), the old quantity is \(180-3(20)=180-60=120\), and the new quantity is \(210-3(20)=210-60=150\). At \(P=30\), the old quantity is \(180-90=90\), and the new quantity is \(210-90=120\). At \(P=40\), the old quantity is \(180-120=60\), and the new quantity is \(210-120=90\).
| Filter price, \(P\) | Old demand, \(Q_d\) | New demand, \(Q_d\) |
|---|---|---|
| $20 | 120 | 150 |
| $30 | 90 | 120 |
| $40 | 60 | 90 |
The new schedule gives 30 more filters at every listed price. Plot the old and new schedules as separate curves, labelling them \(D_0\) and \(D_1\), with \(D_1\) to the right of \(D_0\). The correct description is an increase in demand for filters. The event is a change in the price of a related product, not a change in the filter’s own price.
Check. At each of the three common prices, the new quantity exceeds the old quantity by exactly 30: \(150-120=30\), \(120-90=30\), and \(90-60=30\). The common mistake to avoid is moving along the old filter-demand curve because the word “price” appears in the news. First ask whose price changed.
Justifying the Movement-versus-Shift Test
The distinction can be made precise by writing quantity demanded as a function of the good’s own price and a nonprice condition \(z\): \(Q_d=Q_d(P;z)\). Here \(z\) stands for a condition that affects buyers’ plans, such as income, preferences, or the price of a related good. The point of the notation is to keep the two kinds of change separate.
For a change in own price, keep \(z\) fixed and compare \(Q_d(P_1;z)\) with \(Q_d(P_2;z)\). The two quantities are evaluated using the same demand relationship, so the graph shows two points on one curve. For a change in a nonprice condition, keep a chosen price \(P\) fixed and compare \(Q_d(P;z_1)\) with \(Q_d(P;z_2)\). If these quantities differ, the point at that price has changed; repeating the comparison across prices traces a different schedule. That is why a nonprice change shifts the curve rather than selecting another point on the original one.
This test does not require a particular demand equation. It works with a table, a graph, or a verbal description: hold all nonprice conditions fixed when tracing a movement, and compare quantities at the same own price when identifying a shift.
When Price and Other Conditions Change Together
A news report may describe an own-price change and a nonprice event at the same time. Treat these as two distinct steps. First identify whether the nonprice event shifts demand, and in which direction. Then locate the new price on the applicable curve. This prevents the total change in observed purchases from being mistakenly attributed entirely to one cause.
Worked Example: Separate a Price Movement from a Demand Shift
Weekly demand for passes on a small commuter ferry is initially \(Q_d=240-4P\), where \(P\) is dollars per pass. At the same time, the pass price falls from $40 to $35 and two other events occur. A cheaper competing rail ticket is estimated to reduce ferry-pass demand by 20 at each price. A change in commuting patterns is estimated to raise it by 32 at each price. Find the net shifted demand equation, calculate the before-and-after purchases, and describe both graph changes.
Method. Combine the two nonprice effects at a common price. Their net effect on quantity demanded is \(-20+32=+12\), so demand shifts right by 12. The new schedule is \(Q_{d,1}=240-4P+12=252-4P\).
Before the events, at \(P=40\), quantity demanded is \(240-4(40)=240-160=80\) passes. At the new price \(P=35\), the original schedule would give \(240-4(35)=240-140=100\). Thus, the price reduction alone would move the quantity from 80 to 100 along the original curve.
Now apply the net shift at the new price: \(Q_{d,1}=252-4(35)=252-140=112\). The nonprice changes add 12 passes relative to the original schedule at $35, since \(112-100=12\). The final quantity is 112 passes.
On the graph, first show movement down and right along \(D_0\), from \((80,40)\) to \((100,35)\). Then show the rightward shift at \(P=35\), from quantity 100 to quantity 112, onto \(D_1\). The final point is \((112,35)\). Overall purchases rise by \(112-80=32\) passes, consisting of 20 from the own-price movement and 12 from the net increase in demand.
Check. The new schedule at $35 gives 112, and the decomposition gives \(80+20+12=112\). The competing rail ticket by itself shifts ferry demand left; the commuting-pattern change shifts it right. Their combined nonprice effect is a 12-unit rightward shift. The common mistake to avoid is labelling the entire increase from 80 to 112 as an increase in demand; part of it is a movement along the original curve.
A Reliable Translation Procedure
Make clear which product’s demand is being described. A price change for a related good is not an own-price change for the market under study.
Ask whether it changes the good’s own price or a nonprice determinant. If several events occur, classify each one separately before combining effects.
Use the same demand equation for an own-price movement. For a shift, compare old and new quantities at the same stated prices.
Put \(P\) on the vertical axis and \(Q_d\) on the horizontal axis. Mark a movement on one curve or draw a new curve to the right or left, then use the matching label.
Why the Labels Matter
“Demand increased” and “quantity demanded increased” are not interchangeable descriptions. The first says that buyers plan to purchase more at each given price than before, so the demand curve has shifted right. The second says that buyers plan to purchase more because the good’s own price has fallen, so the point has moved along a given curve. Correct labeling preserves the cause of the change, which is essential when several events occur together.
A useful final check is to ask: Am I comparing quantities at the same price? If yes, the comparison can reveal a shift. If the price itself changed while the other conditions stayed fixed, describe a movement along demand. When both happen, show both steps rather than assigning the whole outcome to one label.
Check Your Understanding
For each problem, identify the schedule or graph change and use the distinction between a movement and a shift. Quantities are in the period stated.
- A demand schedule for reusable lunch containers is \(Q_d=96-2P\), with \(P\) in dollars. The price falls from $18 to $14 while other conditions remain fixed. Find quantity demanded at both prices and give the graph label. (Answer: 60 containers at $18 and 68 at $14; an increase in quantity demanded, shown as a down-right movement along the same curve.)
- At a price of $25, buyers planned to purchase 140 insulated bottles before a widely used commuting route closed. After the closure, they plan to purchase 115 at that same bottle price. State the direction of the demand shift and the correct label. (Answer: demand decreases; the curve shifts left, because quantity falls by 25 at the same own price.)
- Market demand for a monthly arts-streaming plan is initially \(Q_d=300-5P\). A popular festival raises demand by 25 plans at every price. Find the new equation and compare old and new quantities at \(P=40\). (Answer: \(Q_{d,1}=325-5P\); old quantity \(=100\), new quantity \(=125\); demand increases and shifts right.)
- A market has initial demand \(Q_d=210-3P\). A substitute becomes less expensive, reducing demand by 18 at every own price, while rising interest in the product increases demand by 30 at every own price. The product’s own price then falls from $50 to $45. Find the net shift, the final quantity, and the change’s two components. (Answer: net demand shift \(=-18+30=+12\), so \(Q_{d,1}=222-3P\); initial quantity at $50 is 60; at $45 the original curve gives 75, then the shift adds 12 for a final quantity of 87. There is an increase in quantity demanded of 15 along the original curve and an increase in demand of 12 at the new price.)
- A demand schedule for a weekly produce box is \(Q_d=175-5P\). A report says the box’s own price rises from $15 to $19, while a separate change in buyer preferences adds 20 boxes at each price. Compute the initial quantity, the quantity at the new price on the old curve, and the final quantity on the shifted curve. Describe the graph changes in order. (Answer: initial quantity \(=175-5(15)=100\); at $19 on the old curve, quantity \(=175-95=80\); the shifted schedule is \(Q_{d,1}=195-5P\), giving final quantity \(=195-95=100\). First, the higher own price moves up-left along the old curve from 100 to 80; then demand shifts right by 20 at $19.)