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Economic Theory

Dx  f Px , I , , N Py , T , E ... , (5.1)

where Dx – demand of good x;
Px, – price of good x;
I – income of the consumer;

N – number of consumers;
Py – prices of related goods;
T – tastes and fashion;
E – consumer expectations.

A distinction between movement along the demand curve and shifts in
the demand curve is very important while studying demand theory.
Movement along the demand curve takes place when there is a change in

price of a good, other things remaining same. This is also termed as a
change in quantity demanded. That is changes in demand due to a change
in the price of a commodity, other things being equal. In other words,
when either due to increase or decrease in the price of a good, the demand

increases, then it is seen that the demand curve remain the same; only the
equilibrium position on the demand curve is changed.
A demand curve either shifts to the right or left, due to changes taking

place in other factors and not price of the commodity. The change in the
position of the demand curve due to these changes can be termed as the
increase and decrease in demand. When due to changes in the factors such

as tastes, fashion, price of related commodities, income etc., the demand
curve shifts upwards or to the right, increase in demand is said to have
taken place. Similarly, when less is demanded at the same price due to

changes in other factors, it is called decrease in demand.

3. Meaning of Supply. Supply Schedule and Supply Curve. Law of

Supply. Determinants of Supply
Supply refers to the amount of good offered for sale in the market at a
given price. Supply should be distinguished from stock. Stock is the

amount of good which can be brought into the market for sale at a short
notice. Thus supply is the quantity actually brought in the market but stock
is a potential supply. Let us substantiate with an example. A farmer
produces 1000 kg of rice and at a particular price he is willing to offer for

sale about 500 kg in the market. Here, the quantity offered for sale i.e., 500
kg is the supply whereas 1000 kg is the stock.

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