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- [Instructor] We've been[br]talking about the law of demand

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and how if we hold all else[br]equal, a change in price,

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if price goes up, the[br]quantity demanded goes down,

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and if price goes down, the[br]quantity demanded goes up.

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So if you hold all else[br]equal, ceteris paribus,

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we are just moving along this[br]curve depending on what price.

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But what we started talking[br]about is what happens

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when you change some of those things

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that we have been holding equal,

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how does that change demand?

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In the last video, we[br]talked about the price

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of related goods, price of related goods.

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And if the price of related goods change,

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both complements and substitutes,[br]how that might change the,

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how that might increase[br]or decrease demand,

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the entire curve, not just[br]one particular scenario.

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Now let's talk about[br]another one of those factors

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that we've been holding constant,

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and think about how that[br]would change demand,

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the entire curve, if[br]we were to change that,

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and that's expectations of future prices.

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I'll do that in this green.

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So expectations, expectations[br]of future prices,

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of future, future prices.

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So let's say that, let's[br]talk about a first scenario

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right over here, where,[br]let's say that this curve,

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people didn't expect prices[br]to change for my ebook.

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And now, all of a sudden, people expect,

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there's a change in expectation,[br]now all of a sudden,

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they expect the prices[br]to go up going forward.

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So now, now, now expect,[br]expect the future price,

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the future price to go up.

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What's going to happen?

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If you expect the future price to go up,

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and the good or the product[br]in question is something

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that you can store, well, and depending on

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how much you expect it to go up,

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you're probably more likely to buy it now,

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buy it before the price goes up.

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So regardless of what point[br]on this curve we're at,

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regardless of the price point,

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at any one of those[br]price points, people now,

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because they want to, instead[br]of buying it later they want

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to buy it now, they are more,[br]the current demand will go up

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at any of these price points.

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So at $2, more people will want to buy it

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'cause they think it's gonna go up.

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At $4, more people will want to buy it

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'cause they think it's gonna go up.

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At any of these price points,[br]because now there's an,

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the expectations have[br]gone from being neutral

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to now expecting prices to go up,

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it will shift the entire[br]curve to the right.

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So this will shift the[br]entire curve to the right.

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So this right over here is scenario one.

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And it depends how much[br]this changes to say

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how much this shifts to the right.

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This is just a general[br]idea, this is scenario one.

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And the shifting of the entire curve,

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you could say they increased demand.

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So this is literally demand increasing,

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demand, demand increased.

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And when we talk about demand, remember,

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and you're probably[br]tired of me saying this,

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I'm not talking about[br]a particular quantity.

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I'm talking about the entire[br]curve shifting to the right

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because people expect[br]future prices to go up,

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so the current demand went up,

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the current demand curve[br]shifted to the right.

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And now we can just take[br]the other side of that.

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Imagine what happens in scenario two.

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Before people were neutral,[br]that was our curve right there.

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They didn't have any opinion about

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whether future prices[br]were gonna go up or down,

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or maybe they just assumed[br]they were gonna stay the same.

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And now they expect[br]future prices to go down.

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Now expect future prices,[br]future prices, to go down.

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And this is something that happens

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in consumer electronics[br]all the time, you see,

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whenever you buy a laptop or[br]any type of electronic device,

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we now assume that the[br]prices will go down.

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Now what we're talking about[br]is a change in expectations.

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So you're going from neutrality,

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or let's say you're going from,[br]you expect them to go down,

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but now you expect them[br]to go down even faster.

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And if all of a sudden[br]you expect them to go down

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even faster, you're even[br]less likely to buy them now.

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So if you expect, if before[br]you thought prices were going

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to be roughly constant, and[br]now you expect them to go down,

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now you're gonna say, well,[br]hey, at any given price point,

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why don't I just hold off a little bit

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and wait a little bit?

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So it's going to lower demand.

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So in this scenario, the whole[br]curve will shift to the left.

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At any given price point, the[br]quantity demanded will go down

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at any point in that curve.

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And so, the entire demand curve[br]will be shifted to the left.

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So because of scenario two, demand,

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demand was decreased,

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demand was decreased.