Parametric shift
Topic: Aggregate Demand, Income Determination and the Multiplier · NCERT: Class 12, Ch 4 "Determination of Income and Employment"
Meaning
A parametric shift is a movement of a whole line because one of its parameters changes. A parameter is a fixed number in the line's equation. For the aggregate demand line AD = Ā + cY:
- If the intercept (Ā, autonomous expenditure) changes, the line shifts in parallel, up or down.
- If the slope (c, the MPC) changes, the line swings or rotates.
This is different from a movement along a line, which happens when income changes.
Example
If investment rises from 10 to 20, Ā rises and AD shifts up in parallel. If MPC falls from 0.8 to 0.5, as in NCERT's paradox of thrift, AD becomes flatter and swings down.
Don't confuse with
- Movement along a line: when income changes, consumption changes and you move to a different point on the same AD line. The line itself does not shift.