What is Change in Demand?
Definition: Change in demand is the shift in the demand curve, either up or down, brought about by a change in a determinant of demand, with price remaining constant. The shift in demand is more large-scale and has far-reaching implications compared to change in demand quantity.
Understanding Change in Demand
The demand curve is the essential concept whose understanding facilitates the comprehension of change in demand. A demand curve simply plots the relationship between the quantity of a product or service demanded and the price. One can arrive at the demand curve using the data in the demand schedule.
Every point on the demand curve represents the quantity of a product or service that consumers will demand, provided the price stays constant. To understand the demand curve better, consider the demand schedule for Product A below:
| Price ($) | Quantity (Tons) |
| 10 | 12000 |
| 12 | 11200 |
| 15 | 10570 |
| 19 | 9720 |
| 24 | 6630 |
| 30 | 5006 |
From the demand schedule, the quantity of Product A demanded changes at every new price. The demand quantity continues to decline as price hikes. The trend in the demand schedule depicts an essential law in economics called the Law of Demand. According to the law of demand, the quantity of a product or service demand has an inverse relationship with the price, all things remaining unchanged, as it is apparent in the demand curve below.
Nevertheless, change in demand is the opposite of the law of demand. In particular, change in demand happens when there is a change in a determinant of demand, with price remaining unchanged. Therefore, instead of a movement along the demand curve, change in demand produces an actual shifting of the demand curve.
Some of the determinants of demand that cause a shift in demand include the income of the consumers, tastes and preferences of the consumers, price expectations, and the price of substitute goods/services and complementary goods/services.
Change in Demand Example
Consider an example of demand for Nokia phones after the introduction of the smartphone. Before the smartphone, Nokia was the world’s leading manufacturer and supplier of mobile phones. The demand for Nokia phones was the highest in the industry (say D1 in the diagram below). As such, the demand quantity was in Q1.
However, the introduction of the smartphone was revolutionary. The smartphone came with superior computing capabilities compared to Nokia’s feature phones. In particular, users could install and run apps, and web browsing and email functions were far better on smartphones.
All of a sudden, consumers developed new tastes and preferences in favor of smartphones. Subsequently, there was a change in demand for Nokia phones. From the diagram, the new demand for Nokia phones shifted from D1 to D2. As such, the new demand quantity for the phones became Q2. Interestingly, the change in demand happened regardless of the price remaining unchanged at P1.
Difference between Change in Demand and Change in Demand Quantity
From the explanations above, it is apparent that a change in demand and a change in demand quantity are unrelated. On the one hand, we established that change in demand is an actual movement of the demand curve either up or down (shift to the left or the right). For example, the curve in the diagram above shifted to the left, showing that fewer consumers now prefer the product.
Further, the change in demand does not obey the law of demand. It is because the law of demand only captures the relationship between price and quantity of a product/service, all other things remaining unchanged.
On the other hand, change in demand quantity happens when the price of a product/service changes, all other things constant. In the demand curve plotted at the beginning of this article, one can see that the demand quantity changed from 12,000 tons to 11,200 tons after the price of Product A changed from $10 to $12. As such, change in demand quantity agrees with the law of demand.