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November 04, 2005
Suggestions for new terminology?
Stephen Karlson (Cold Spring Shops) links to Phil Miller's (Market Power) post and mine on a common media mistake. Karlson adds this,
...the source of the confusion in many observers' minds might be in the terminology of introductory economics (and nowhere else in economics) itself.
Much of the discipline refers to the act of drawing a new demand or supply curve as a "change in demand (or supply)," sometimes calling that an "increase" or "decrease" in demand or supply. A new choice along the same demand or supply curve goes by the cumbersome locution "change in quantity demanded (or supplied.)" Bleah. I recommend the use of the term "shift" to describe the drawing of a new curve, and I'm continually reinforcing "left shift" and "right shift" as "increase" and "decrease" have the potential for mischief on the supply curve. A new choice along the same curve is a "movement along."
I agree. Bleah. He is absolutely right that this terminology is only an issue at the introductory level. Why, you ask? Long story. At more advanced levels, the mathematics forces you to keep track of what is going on without resorting to these labels. That's part of it. We (those of us who teach this) also just tend to obsess over making sure students shift the right curve. These labels, properly used, do force you to be clear about what you're doing. But I agree with Karlson that there has got to be a better way.
Personally, I make students equate the book's definition with exactly what Karlson said. I guess that will do until I write my own book.
Posted by William Polley at November 4, 2005 10:20 PM
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Tracked on November 5, 2005 03:14 PM
Comments
Advanced courses treat P & Q as endogenous with the factors that shift the D & S curves as exogenous. I know - bleah!
Posted by: pgl at November 5, 2005 08:38 AM
Thanks for the link and the comments. I wrote my own course pack for micro principles. Here's the way I phrase things. There might be an even less cumbersome way of putting it.
The notion of drawing a new Demand Curve underlies two ways of describing the effect of an income change: it leads to a change in demand or to a shift of the Demand Curve. I think the phrase "change in demand" is sufficiently close to "change in quantity demanded" (the effect of a product price change) as to increase transaction costs. Therefore I will use the phrase "shift of the demand curve" to describe the effect of drawing a new curve. The phrase is sufficiently different from "movement along the curve" (again the effect of the price change) that readers will be able to distinguish the two effects.
In class, and in any office-hours consultation, my terminology is invariably "movement along or shift?"
Posted by: Stephen Karlson at November 6, 2005 02:51 PM
I've been using "shift in the demand (supply) curve" and "movement along the demand (supply) curve" for more than a decade now. I'm still amazed that it hasn't become standard textbook language.
However, in a broader context, defining demand as
Q = f(P, Y, Tastes, Psubs, Pcomps, X) (where X is a vector of all other factors that matter), then a change in P does change demand. The problem is that the media tend to say "demand" when we mean "demand curve." Or the media analyze the effects of a change in demand caused by a change in price with the effects of a shift in the demand curve.
Posted by: Donald A. Coffin at November 7, 2005 11:22 AM
Donald,
You got it. About this time of year, first year grad students are doing Q=f(P,X) in their price theory courses and going off to TA a principles section talking about changes in "quantity demanded" vs changes in "demand".
The ones that notice something weird about that will someday become good economics professors.
Posted by: William Polley at November 7, 2005 11:11 PM