Here’s a simple concept to apply. Remember it and you’ll never mess up when it comes to moving along a curve or shifting it.
Look at what is measured on the y-axis. If it changes, move along the curve. If something else relevant changes, shift the curve.
Here’s an example.
The graph in Figure 1 measures the price of a cup of coffee on the y-axis and the quantity of coffee that you drink in a day on the x-axis. The graph shows a downward-sloping curve that shows the amount of coffee you drink on a normal day at various prices.
One of the points on the curve shows that when the price of coffee is $2 a cup, you drink 3 cups a day. Another point shows that when the price of coffee is $1 a cup, you drink 6 cups a day.
When the price of a cup of coffee falls, there’s a movement down along the curve. As price falls, you drink more coffee.
Now suppose that it’s a day during final exam week and you have a monumental amount of studying to complete. You need more coffee. When the price of coffee is $2 a cup, you drink 5 cups a day. And when the price of coffee is $1 a cup, you drink 8 cups a day. Because it’s final exam week, your relationship between the price of coffee and the amount of coffee you drink changes.
Look at Figure 2.
It shows your original relationship between the price of coffee and how many cups of coffee you drink—that’s the blue curve on the left. But it also shows a second relationship. During final exam week, the curve shifts to the right. At every price of coffee, you drink more coffee.
Remember the concept. When what is measured on the y-axis changes, you move along the curve. In this example, when the price of a cup of coffee changes, you move down along the curve as the price falls. You move up along the curve as the price rises.
But if something relevant changes that isn’t measured on the y-axis (in this case, you go from a normal day to a day during finals week), the curve shifts. You have a new relationship with coffee.