Shifts in demand

Shifts in demand occurs when price remain constant but there is an increase or decrease in the quantity demanded. This is caused by a change in available resource, let's say you have $10 and it is enough to buy 10 sodas and some chips for the crew but sodas sell for $1.00 on where you're at. Therefore the demand for the sodas would decrease with the rise in price. You might be forced to either sacrifice the chips and just buy the 10 sodas anyway or just buy whatever number of sodas would fit with your available money so that you could still buy the chips. Luckily a friend contributed another $10 so you could still buy 10 sodas without sacrificing the chips. Because of an increase of your available disposable resource, the demand curve would increase without a decrease in price because you now have more money. A rise on average income of consumers would keep demand steady or increase even when prices of common goods go up or remain unchanged. One example is oil, if it gets too high but salaries don't keep up with it, you limit your driving or not drive at all. You might buy fuel efficient cars, since these cars consume less fuel but its not as fun to drive as a V-8, you would sacrifice the fun for your limited resource. All of these combined would decrease the demand for gasoline. If salaries go in lockstep with the rise of oil then the demand would remain constant or even increase.

When incomes increase but demand for the good decreases, that means there is a superior type of that good now in demand because more people could now afford it. When you got tons of money, you would always want to buy top of the line cars like Ferrari or Porsche and ignore cheap ones. People with insufficient incomes can't buy these but instead purchases the practical mass produced cars at a cheaper price. Suppose incomes spiked up 100% miraculously, then the demand for inferior cars would decrease.



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