Economics, 3rd Edition

2. 

The substitution effect. Now that milk is lower in price compared to other products such as fruit juice, 

some consumers will choose to substitute the more expensive drinks with the now cheaper milk. This 

switch accounts for the remaining part of the increase in quantity demanded.

A Shift in the Demand Curve 

The demand curve for milk shows how much milk people are willing to buy 

at any given price, holding constant the many other factors beyond price that influence consumers’ buying 

decisions. As a result, this demand curve need not be stable over time. If something happens to alter the 

quantity demanded at any given price, the demand curve shifts. For example, suppose a top European 

medical school published research findings that suggested people who regularly drink milk live longer, 

healthier lives. The discovery would raise the demand for milk. At any given price, buyers would now want 

to purchase a larger quantity of milk and the demand curve for milk would shift.

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CHAPTER 3  THE MARKET FORCES OF SUPPLY AND DEMAND  47

Figure 3.3 illustrates shifts in demand. Any change that increases the quantity demanded at every 

price, such as our imaginary research report, shifts the demand curve to the right and is called an increase 

in demand. Any change that reduces the quantity demanded at every price shifts the demand curve to the 

left and is called a decrease in demand.