The demands for some products are affected by dramatic changes in the
weather. During winter, for example, a cold snap will lead to increases in
demand for electricity, natural gas, and other energy sources used to heat
homes and buildings. More snowfall will increase the demand by some
people for ski vacations; for others their demand for beach vacations in
southern destinations will increase. During summer, a hot spell increases
the demand for air conditioners and the electricity to power them, and a
dry spell will increase farmers’ demand for water to irrigate their crops.
Movements Along the Curve Versus Shifts
of the Whole Curve
Suppose a news story reports that a sharp increase in the world price of
coffee beans has been caused by an increased worldwide demand for
coffee. Then the next day we read that the rising price of coffee is
reducing the typical consumer’s purchases of coffee, as shoppers switch to
other beverages. The two stories appear to contradict each other. The first
associates a rising price with rising demand; the second associates a rising
price with declining demand. Can both statements be true? The answer is
yes—because the two statements actually refer to different things. The
first describes a shift in the demand curve; the second describes a
movement along the demand curve in response to a change in price.
Consider first the statement that the increase in the price of coffee has
been caused by an increased demand for coffee. This statement refers to a
shift in the demand curve for coffee—in this case, a shift to the right,