| Chapter 4 One of the absolutely most crucial concepts for you to understand in order to earn a high grade is the difference between a movement along a curve and a shift in a curve. You have already seen one example of this difference in Chapter 3 with the production possibilities frontier (PPF). Compare, for instance, Figures 3.2 and 3.5 in the textbook. It is possible to move along the frontier by changing the mixture of what is produced. And, economic growth shifts the frontier outward. Chapter 3 did not stress the difference between a movement along the PPF and a shift in the PPF because there were a lot of other lessons to learn from the PPF. But, the difference between a movement along a curve and a shift in the curve is one of the most important subjects covered in Chapter 4. It is a fair assessment to say that unless you understand this distinction, you will find it difficult to pass the class. The difference between a "movement along" versus a "shift" is important for both demand curves and supply curves. In the textbook, Figures 4.3 and 4.4 illustrate the difference for the demand curve and Figures 4.6 and 4.7 show the difference for the supply curve. The general rule for both curves is that a change in the price of the good causes a movement along the curve; a change in any other relevant factor causes a shift in the curve. To see how this general rule is applied for the demand curve, click on the demand curve below; for the supply curve, click on the supply curve below. |
