<P> There is movement along a demand curve when a change in price causes the quantity demanded to change . It is important to distinguish between movement along a demand curve, and a shift in a demand curve . Movements along a demand curve happen only when the price of the good changes . When a non-price determinant of demand changes the curve shifts . These "other variables" are part of the demand function . They are "merely lumped into intercept term of a simple linear demand function ." Thus a change in a non-price determinant of demand is reflected in a change in the x-intercept causing the curve to shift along the x axis . </P> <P> The shift of a demand curve takes place when there is a change in any non-price determinant of demand, resulting in a new demand curve . Non-price determinants of demand are those things that will cause demand to change even if prices remain the same--in other words, the things whose changes might cause a consumer to buy more or less of a good even if the good's own price remained unchanged . Some of the more important factors are the prices of related goods (both substitutes and complements), income, population, and expectations . However, demand is the willingness and ability of a consumer to purchase a good under the prevailing circumstances; so, any circumstance that affects the consumer's willingness or ability to buy the good or service in question can be a non-price determinant of demand . As an example, weather could be a factor in the demand for beer at a baseball game . </P> <P> When income increases, the demand curve for normal goods shifts outward as more will be demanded at all prices, while the demand curve for inferior goods shifts inward due to the increased attainability of superior substitutes . With respect to related goods, when the price of a good (e.g. a hamburger) rises, the demand curve for substitute goods (e.g. chicken) shifts out, while the demand curve for complementary goods (e.g. tomato sauce) shifts in (i.e. there is more demand for substitute goods as they become more attractive in terms of value for money, while demand for complementary goods contracts in response to the contraction of quantity demanded of the underlying good). </P> <Ul> <Li> Changes in disposable income, the magnitude of the shift also being related to the income elasticity of demand . </Li> <Li> Changes in tastes and preferences--tastes and preferences are assumed to be fixed in the short - run . This assumption of fixed preferences is a necessary condition for aggregation of individual demand curves to derive market demand . </Li> <Li> Changes in expectations . </Li> <Li> Changes in the prices of related goods (substitutes and complements) </Li> <Li> Population size and composition </Li> <Li> N.B. Whilst variations in the price of the actual product affects the overall quantity demanded, economists do not consider price to affect the demand curve . </Li> </Ul>

How does income cause a shift in the demand curve
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