What is the reason for the rightward and leftward shift of demand and supply curve?
This is a common question asked from me, when I teach students the concepts of ‘demand and supply’. One basic rule you all need to memorize, ‘Right shift means to increase or rise’ and ‘Left shift means less or decrease’.
Demand shows the inverse relationship between price and quantity demanded ceteris paribus (keeping other things which affect the demand constant). Now, when we talk about its construction, we get a negatively sloped curve, namely the demand curve.
Wherein quantity demanded is shown on the x-axis, and the price is shown on the y-axis. When the other factors start changing (Wondering what the first factor was? Answer. Price of the commodity). For example, if the income of the consumer increases it causes a rightward shift in the demand curve, in case the consumer is demanding normal goods, if consumer develops favorable taste towards a particular brand, then also it will lead to the rightward shift. It is a wider concept please refer below slideshow for better understanding.
Supply shows the direct relationship between price and quantity supplied keeping other factors constant (ceteris paribus). When we construct a supply curve, taking quantity supplied on the x-axis and price on the y-axis, we get an upward sloping curve.
Now, Supply is a producer concept. So, if the cost of inputs increases the supply curve will shift to the left, or if the government starts giving subsidies for the production of some goods than supply will shift to the right.