Section 5

Shifts and Comparative Statics

Every news headline about prices is a supply and demand graph shifts question. A late frost in Brazil destroys coffee crops — the supply curve moves. A viral trend makes a product fashionable overnight — the demand curve moves. The skill these headlines test is comparative statics — comparing the equilibrium before and after a change — and it is the one skill every introductory economics exam comes back to.

The model here uses $Q_d = a - bP$ for demand and $Q_s = c + dP$ for supply. At the defaults — $a = 100$ , $b = 2$ , $c = -20$ , $d = 4$ — the market clears at $P^* = 20$ and $Q^* = 60$ . When you shift a parameter, you are asking: where does the market clear now?

The four shifts and what they do

There are four canonical shifts. Two move the demand curve; two move the supply curve. Each shifts the equilibrium in a predictable direction.

Shift	What happens to $P^*$	What happens to $Q^*$	Everyday example
Demand shifts right	Rises	Rises	Incomes rise — normal good
Demand shifts left	Falls	Falls	A substitute gets cheaper
Supply shifts right	Falls	Rises	Better production technology
Supply shifts left	Rises	Falls	Input costs spike

Notice the pattern: demand shifts move $P^*$ and $Q^*$ in the same direction, while supply shifts move them in opposite directions. That pairing is the fastest exam check — if you can remember one rule, remember that one.

Drag the curves yourself

A static diagram can show you one equilibrium. What it cannot do is let you move the curve and watch the equilibrium chase it in real time. Use the parameter controls below to do exactly that — the graph updates as you drag.

Supply and demand — live

No scalar found for key: equilibrium_price

No scalar found for key: equilibrium_quantity

Shift of the curve vs movement along the curve

Students sometimes confuse two things: the curve moving, and a point travelling along a curve that stays fixed. They are not the same event.

Shift of the curve

Caused by something outside the good's own price — a change in income, the price of a related good, input costs, technology, or consumer tastes. The entire line relocates: every price-quantity pair on it is different from before.

In the demand equation $Q_d = a - bP$ , a change in $a$ shifts the curve. In the supply equation $Q_s = c + dP$ , a change in $c$ shifts the curve. These are the levers that represent outside economic forces.

Movement along the curve

Caused by a change in the good's own price — which, in a supply-and-demand model, happens because the other curve shifted. The curve itself stays fixed; you are sliding along a line that has not moved.

When the supply curve shifts right and drives the price down, buyers respond by purchasing more — that response is a movement along the demand curve, not a new shift of it. Only one curve shifted; the other curve held still and answered via the price.