What's The Deal Dirk?
Student Q&A's with Dirk
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How do you know when to slide along a curve as opposed to shifting the entire curve outward (or inward)?
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Focus on the laws of supply and demand.
The law of supply states that there is a direct relationship between the price and the quantity supplied. When the price rises sellers desire to produce more at every price. The resulting supply curve is positively sloped.
The law of demand states that there is an inverse relationship between the price and the quantity demanded. When the price increase s consumers desire to buy less at every price. As a result, the price – because it is part of the definitions of supply and demand – causes a slide along a curve.
What causes the supply or demand curve to shift? Any variable that is not part of definition of supply or demand, or something other than the price. If you keep this idea foremost in your thoughts, you’ll never get confused about whether to slide along a curve (price) or shift the curve (everything else).
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