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We have talked a little bit about the law of demand

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which tells us that, all else equal,

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if we raise the price of a product,

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then the quantity demanded for that product will go down.

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..common sense. If we lower the price,

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the quantity demanded will go up.

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And we will see so in a few special cases for this.

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What I want to do in this video is focus on

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these other things that we've been holding equal,

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the things that allow us to make this statement,

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that allow us to move along this curve

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and think about if we were to change one of those things

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that we were otherwise considering equal,

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how does that change the actual curve?

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How does that actually change

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the whole quantity demanded price relationship?

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And so the first of these that I will focus on:

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the first is the price of competing products.

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The Price of Competing Products. [WRTING]

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So if you assume that the price of...

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actually, I shouldn't say Competing Products,

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I will say the price of Related Products because [WRITING]

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we will see that they are not all competing.

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Price of Related Products ... is one of the things

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that we are assuming is constant when we,

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it‘s been held equal when we show this relationship.

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We're assuming that these other things aren't changing.

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Now what would happen if these things changed ?

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Well, imagine we have other, say other ebooks' price goes up. [WRITING]

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The price of other ebooks go up.

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So what will that do

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to our price quantity demanded relationship ?

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If other ebooks' prices go up,

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now all of a sudden my ebook,

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regardless of what price point we're at,

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at any of the price points,

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my ebook is going to look more desirable.

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At $2, it is more likely that people will want it,

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more people will want it

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because the other stuff's more expensive.

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At $4, more people will want it.

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At $6, more people will want it.

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$8, more people will want it, $10 more people will want it.

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So if this were to happen,

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that would actually shift the entire demand curve to the right.

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So it would start to look something like this...

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it would look something like that.

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We'll call that Scenario 1. That is Scenario 1.

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And these other ebooks,

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we can call them substitutes for my product.

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So this right over here...

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These other ebooks, these are substitutes. [WRITING]

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If, people might say,

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oh you know that other book looks kind of comparable,

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if one is more expensive and one is cheaper,

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maybe I'll read one or the other.

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So, in order to make this statement,

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in order to stay along this curve,

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we have to assume that this thing is constant.

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If this thing changes, this is going to move the curve.

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If other ebooks prices go up,

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it will probably shift our curve to the right.

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If other ebooks‘ prices go down,

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that will shift our entire curve to the left.

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So this is actually changing our demand,

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it’s changing our whole relationship.

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So it‘s shifting demand to the right.

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Let me write that, so this is going to shift Demand... [WRITING]

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so the entire relationship: Demand to the right. [WRITING]

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I really want to make sure you have this point clear.

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When we hold everything else equal,

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we're moving along a given demand curve.

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We are essentially saying: the demand,

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the Price Quantity demanded relationship is held constant

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and we can pick a price

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and we'll get a certain quantity demanded.

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We are moving along the curve.

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If we change one of those things,

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we might actually shift the curve.

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Once we change this demand schedule,

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which will change this curve.

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Now if we...there are other related products,

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they don't just have to be substitutes.

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So for example, let's think about Scenario, a Scenario 2.

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Or maybe the price of a....the price of a Kindle goes up, [WRITING]

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so the price of a Kindle...let me write it this way: [WRITING]

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Kindle's price goes up. [WRITING]

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Now the Kindle is not a substitute.

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People don't either buy an e-book or

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they won't either buy my ebook or buy a Kindle.

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Kindle is a complement, you actually need a Kindle or an Ipad

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or something like it in order to consume my ebook.

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So this right over here, this right over here is a complement.

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It is a complement. [WRITING]

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So if a complement's price becomes more expensive,

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and this is something that...

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one of the things that people might use to buy my book,

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then it would actually, for any given price,

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lower the quantity demanded.

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So in this situation, if my book is $2,

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since fewer people are going to have Kindles,

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or maybe they have used some of their money

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already to buy the Kindle,

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they're gonna have less to buy my book

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or just fewer people will have the Kindle.

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For any given price, it’s going to lower the quantity demanded.

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For any given price.

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And so essentially, it will shift,

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it will change the entire demand curve.

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It will shift the demand curve to the left.

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So this right over here is scenario 2.

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And you can imagine the other way,

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if the Kindle's price went down, then that would shift

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my demand curve to the right.

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If the price of substitutes went down,

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then that would shift my entire curve to the left.

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So you can think about all these scenarios.

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And actually I encourage you to,

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think about and draw them yourselves, think about products...

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could be an ebook or could be some other type of product

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and think about what would happen.

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Well (1) one, think about what the related products are,

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the substitutes and potentially complements

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and then think what would happen as those prices change.

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And always keep in mind, the difference between demand

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which is this entire relationship, the entire curve,

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that we can move along if we hold everything else equal

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and only change price,

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and quantity demanded, which is a particular quantity

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for a particular price holding everything else equal.