When do supply and demand curves shift?

Question

Let's assume that the price of apples has risen and that the quantity of apples sold during the last couple of weeks has decreased. From that, we can infer that the supply curve must've shifted to the left.I still have trouble fully understanding this. I was told that when the endogenous variables, such as price and quantity, change, only a movement on the demand/supply curve happens and when exogenous variables change (demand shocks etc.) the curves themselves will shift to the left or right.In this example a price increase takes place, so we're just moving up the demand curve, no? And when we reach the target price level, there'll be a corresponding quantity. And now because of market equilibrium the supply curve has to reach that spot, too? So it shifts to the left? Is that correct? So in a demand - supply model, there can't be singular movements on the curves, as there will always be immediate reactions that seek to recreate the equilibrium?Edit: Thanks for all the answers!

Answer 1

Sounds like you were possibly misinformed about the differences between a movement along a supply or demand curve and a shift in the supply or demand curve.

Let's isolate each curve separately.

These are the main factors that cause the demand curve to shift entirely:

1. Change in consumer incomes (increased income means can afford to buy more so demand shifts to right)
2. Change in tastes (if a product/good becomes more fashionable, people will want more of it so demand shifts to the right - this has nothing to do with price!)
3. Change in price of a substitute good (if the price of oranges goes up - a substitute for apples - then consumers will switch from oranges to apples, causing the demand for apples to rise / shift right)

These are the main factors that cause the supply curve to shift entirely:

1. Changes in the cost of production (if it becomes more expensive to produce apples, farmers will decrease production and the supply will shift to the left)
2. Entry of new firms (more firms entering a market will increase the supply)
3. Weather (for agricultural products, bad weather or drought can decimate a crop and the supply will shift left)
4. Advances in Technology (if it becomes more efficient to grow / harvest apples, farmers will increase production and supply will shift right)
5. Taxes or subsidies imposed on a good by the government

Now if either the demand or supply curve shifts only, and the other curve remains the same, then we will see a movement along the other curve. For example, if supply curve shifts left (bad weather), and demand remains unchanged, then the quantity DEMANDED will decrease as the new intersection of supply and demand is at an equilibrium point to the left (lower) than the original point. None of the factors that affect demand have necessarily changed, but as the fall in supply will push the price up, the law of demand kicks in and the quantity demanded must fall.

There are also cases where factors affecting supply and demand can happen simultaneously. For example, if there is bad weather AND consumer incomes increase, then the supply curve will shift to the left AND the demand curve will shift to the right. The impact on quantity here is ambiguous as it depends on how far each curve shifts. These movements might simply cancel each other out! But the impact on price is unquestionably that it will go up if the supply curve shifts left AND the demand curve shifts right.

The point to stress here is that the factors that affect the demand curve are INDEPENDENT from the factors that affect the supply curve. The factors affecting consumers buying choices governs the movement of the demand curve and the factors affecting the producers output choices governs the movement of the supply curve.