Hey how you doing econ students this is Mr. Clifford welcome to ACDC econ.
Right now we’re gonna talk about shifting demand and supply.
(Music starts).
In previous videos you learned about demand and why it’s downwards sloping.
You also learned about supply and why it’s upwards sloping.
And of course you understand the idea of equilibrium.
That is the only place where the quantity demand exactly equals a quantity supply.
You should also understand why when there’s a change in price that moves along the curve.
For example, when the price goes up the quantity supply increases and the quantity demand it
decreases causing a surplus.
When the price falls below equilibrium the quantity demand increases, the quant supply
decreases and that causes a shortage.
And that’s what happens when there’s a change in price it moves along the demand
and supply curves.
But what if there’s a shift in the entire curve?
Remember we learned the shifters in previous videos there’s 5 shifters of demand and
there’s 5 shifters of supply.
To understand what happens what happens when there’s a shift in demand or a shift in
supply let’s take a look at a scene from the movie frozen.
In this scene Princess Ana walks into Wandering Oaken’s Trading Post and we find out what
happens when there’s a change in a market.
“Woo-hoo.”
“Hm?”
“Big summer blow out.
Half off swimming suits, clogs, and a sun balm of my own invention.”
Using this example from frozen let’s analyze the market for sun balm.
The point of learning supply and demand is to understand what happens price or quantity
when there’s gonna be a change in a market.
So this graph helps us to predict what happens when we find out there’s gonna be a change.
The change that happens is that summer suddenly becomes winter.
So what’s gonna happen to the supply or the demand for sun balm?
Well it’s definitely gonna affect demand because it’s gonna affect consumers.
It’s gonna have no effect on supply or the production of sun balm.
Now is the demand gonna go up or is it gonna go down?
Well of course the demand is gonna go down because people don’t wanna wear sun balm
during the winter time they wanna wear it during the summer time.
So the demand is gonna decrease or shift to the left.
The new equilibrium is right here and so the price and the quantity is gonna fall.
“Woo-hoo, big summer blow out.”
Now it’s time for you to practice.
I have 6 scenarios right here for hamburgers.
Your job is to figure out if it’s gonna be an increase or a decrease in demand or
supply, what shifter it is, and what happens to price and quantity for each scenario.
So get a piece of paper and draw 6 supply and demand graphs and show on each graph what
happens for each one of these scenarios.
And remember for each one of these things we’re analyzing hamburgers.
Make sure to pause the video and then I’ll explain each one, alright?
Good luck.
For the first one new grilling technology would cause a supply to shift to the right
or increase.
Now this is supply because this is something that’s gonna increase the production of
hamburgers, and remember technology’s the shifter.
The graph tells us that price will decrease and the quantity is gonna increase.
For number 2, an increase in the price of chicken sandwiches, a substitute, is gonna
cause the demand for hamburgers to increase.
Remember the price of related goods, substitutes and compliments, is a shifter of demand.
And if chicken sandwiches are more expensive that means people are gonna buy more hamburgers
so the demand for hamburgers shifts to the right so price goes up and quantity goes up.
Ah!
One rugged road under!
For number 3 if the price of the hamburgers decreases that’s not gonna shift the curve.
Remember a change in price does not shift the curve it moves along the curve.
So if the price goes down the quantity demand is gonna increase.
The quantity supply is gonna decrease and that’s gonna lead to a shortage.
Don’t forget price never shifts the curve.
For number 4 if the price of ground beef a key resource in the production of hamburgers
increases that means we’re gonna produce less hamburgers.
So the supply will shift to the left, price will go up and quantity will go down.
And for the last one if there’s human fingers found in many restaurants that’s gonna decrease
the demand for hamburgers, right?
So the demand shifts to the left, price goes down, and quantity goes down.
So a real quick story, one time I was doing that example in class and had a student who
said that “It wasn’t gonna be demand it was gonna be a supply shifter.”
The supply would go down.
So I walked up to them I said “Well why do you think it’s gonna be a supply shifter
not a demand shifter?”
And this innocent student says “Well, if your workers don’t have any fingers then
that means they can’t produce as much and so that’s gonna decrease supply.”
Ah!
Well….hmmm.
It’s definitely gonna be a demand shifter if there’s fingers found in food people
aren’t gonna buy it, demand’s gonna decrease.
Now whether you’re in high school or in college you’re taking microeconomics or
macroeconomics it’s super important to understand supply and demand.
Understanding this graph is not just good for class it’s also good for life.
You can predict changes in a market it can help you if you’re in business or if you’re
a consumer buying things.
Cause you know what’s gonna happen to the price and to the quantity.
Now I hope this video was helpful, make sure to take a look at the next video that’s
gonna explain price control, something called price ceilings, price floors.
And take a look at my review app for your smartphone or tablet so you can get ready
for the next test, alright?
Till next time.