|Posted by Tarikur Rahman on November 5, 2012 at 5:40 AM|
Y.A.C.S - A brilliant way to remember shifts in demand - By Raza Ali (Head of Maths at Hammersmith Academy)
When introduced with the demand and supply curves, one of the first questions raised by students is whether they should shift the demand or supply curves or should it be a movement along either curve? This blog aims to provide a method in dealing with such a dilemma although it may not cover every single example.
Y.A.C.S (Shifts in the demand curve)
A simple method of deducing a shift in the demand curve is by using the abbreviation ‘YACS’ where Y equals income of consumer, A means attitudes of consumer (or if the product is fashionable), C equals prices of complements and S equals prices of substitutes. To see whether this works, we can try an example:
Scenario – The government reduces the rate of income tax. Use supply and demand to analyse the effects on chocolate
If the rate of income tax falls, the level of consumer income (Y) will rise. Because Y has been affected, we must turn to YACS. According to YACS, this will result in a shift in the demand curve to the right (a fall in income will result in a shift to the left):
Once we have drawn our demand and supply diagram, we can now analyse the effects. The shift in the demand curve from D1 to D2 results in an increase in demand of this chocolate. Businesses will take advantage by increasing their prices and increase their supply of chocolate (movement along the supply curve) to meet this increased level of demand. Hence, a decrease in income tax results in an increase of quantity demanded and supplied of chocolate.
Always remember a shift in the demand curve will cause a movement along the supply curve.