Demand and Supply Curves: Rotations versus Shifts

Abstract

Virtually all principles and intermediate texts draw demand and supply curves as parallel shifts when a non-price variable changes its value, which implicitly assumes that the demand (or supply) relation is linear. But economists commonly speak of “the” income elasticity, as if it were constant (and not varying continuously as is the case with the linear specification). If the income elasticity is constant, then the demand curve must rotate when income changes.