Economics graphs Statistics Project Example | Topics and Well Written Essays - 1250 words

Economics graphs - Statistics Project Example A shift in the demand curve for a good is brought about by various factors such as income, population, price of a substitute or complement, consumer taste or preference and expectation among others. A change in any of these factors would lead to a rightward or leftward shift in the demand curve depending on the direction of the change (Begg, Fischer & Dornbusch). For instance, an increase in the income of consumers causes a corresponding increase in the demand for normal good A, with price level remaining the same. Given Graph 2, demand curve D1 would shift rightward to D2 in view of the increase in income. On the other hand, D1 would shift leftward to D3 should there be a decrease in the income of consumers. Similarly, the supply curve shifts leftward or rightward depending on the change in factors such as technology or productivity and price of raw materials. For example, as illustrated in Graph 3 below, a decrease in the price of flour, which is the main ingredient of bread, would cause the bread supply S1 to shift rightward to S2. On the contrary, an increase in the price of flour would result in a leftward shift of S1 to S3. The absolute value of the answer to the above equation would indicate how a percentage change in the price would affect the quantity demanded. Demand is considered elastic if the computed elasticity is greater than 1. This means that a 1% change in the price of good A would be accompanied by a more than proportionate change in quantity demanded.