Page 93 - Krugmans Economics for AP Text Book_Neat

figure 5.2 An Increase in Demand

Price of
coffee beans
(per pound) Demand Schedules for Coffee Beans
Quantity of coffee beans Section 2 Supply and Demand
$2.00 demanded
Price of (billions of pounds)
1.75 Demand curve coffee beans
in 2006 (per pound) in 2002 in 2006
1.50 $2.00 7.1 8.5
1.75 7.5 9.0
1.25 1.50 8.1 9.7
1.25 8.9 10.7
1.00
1.00 10.0 12.0
0.75 0.75 11.5 13.8
Demand curve 0.50 14.2 17.0
0.50 in 2002 D 1 D 2

0 7 9 11 13 15 17
Quantity of coffee beans
(billions of pounds)

An increase in the population and other factors generate an in population, the other showing demand in 2006, after the
increase in demand—a rise in the quantity demanded at rise in population—and their corresponding demand
any given price. This is represented by the two demand curves. The increase in demand shifts the demand curve to
schedules—one showing demand in 2002, before the rise the right.

It differs from the 2002 demand schedule due to factors such as a larger population
and the greater popularity of lattes, factors that led to an increase in the quantity of
coffee beans demanded at any given price. So at each price, the 2006 schedule shows a
larger quantity demanded than the 2002 schedule. For example, the quantity of coffee
beans consumers wanted to buy at a price of $1 per pound increased from 10 billion to
12 billion pounds per year, the quantity demanded at $1.25 per pound went from
8.9 billion to 10.7 billion pounds, and so on.
What is clear from this example is that the changes that occurred between 2002 and
2006 generated a new demand schedule, one in which the quantity demanded was
greater at any given price than in the original demand schedule. The two curves in Fig-
ure 5.2 show the same information graphically. As you can see, the demand schedule
for 2006 corresponds to a new demand curve, D 2 , that is to the right of the demand
curve for 2002, D 1 . This change in demand shows the increase in the quantity de-
manded at any given price, represented by the shift in position of the original demand
curve, D 1 , to its new location at D 2 .
It’s crucial to make the distinction between such changes in demand and movements
along the demand curve, changes in the quantity demanded of a good that result from
a change in that good’s price. Figure 5.3 on the next page illustrates the difference.
The movement from point A to point B is a movement along the demand curve: the
quantity demanded rises due to a fall in price as you move down D 1 . Here, a fall in the A change in demand is a shift of the
price of coffee beans from $1.50 to $1 per pound generates a rise in the quantity de- demand curve, which changes the quantity
manded from 8.1 billion to 10 billion pounds per year. But the quantity demanded can demanded at any given price.
also rise when the price is unchanged if there is an increase in demand—a rightward shift A movement along the demand curve
of the demand curve. This is illustrated in Figure 5.3 by the shift of the demand curve is a change in the quantity demanded of a
from D 1 to D 2 . Holding the price constant at $1.50 a pound, the quantity demanded good that is the result of a change in that
rises from 8.1 billion pounds at point A on D 1 to 9.7 billion pounds at point C on D 2 . good’s price.

module 5 Supply and Demand: Introduction and Demand 51