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In previous videos, we've covered[br]the basics of the demand curve.

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Now let's discuss what happens[br]when the demand curve shifts

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due to increases or decreases[br]in market demand.

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First, let's look at[br]an increase in demand.

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An increase in demand

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means that the demand curve[br]shifts up and to the right.

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Take the market[br]for house plants, for instance.

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On the old demand curve at $20,

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the quantity demanded[br]was five plants,

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but on the new demand curve[br]at, again, $20,

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the quantity demanded[br]is eight plants.

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At $16, we go from six plants[br]to nine plants.

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At $12, we go from seven[br]to ten plants, and so on.

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An increase in demand is a greater[br]quantity demanded at every price.

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We can also read[br]an increase in demand

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using what is called[br]the vertical method.

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What that means[br]is that for every quantity,

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there's a greater willingness[br]to pay for that quantity.

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For instance, for the fifth unit,

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people had been willing[br]to pay $20 for that unit.

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Now with the new demand curve,

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people are willing to pay[br]$32 for that unit.

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In summary, an increase in demand

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means an increase[br]in the quantity demanded

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at every market price,

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or equivalently, [br]it means an increase

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in the maximum willingness[br]to pay for a given quantity.

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A decrease in demand.

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Well, that's just the opposite of an[br]increase in demand. It's a shift down

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and to the left.

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There is a decrease in quantity[br]demanded at every price now at $20,

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people only want to buy two houseplants

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at $16. We go from six to[br]three house plants and so on.

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Similarly, this means a decrease in the[br]willingness to pay for the same quantity

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for the fifth unit people were willing to

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I pay $20 for that unit

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but now they're only going to Fork[br]over eight dollars for that house plan.

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So what can cause a shift in demand?

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What would make consumers, buy more[br]or less of a good at every price.

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Take a moment to jot down. Some guesses[br]will go through these with a few examples,

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but the real goal is not[br]to memorize this list.

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But rather to understand what an[br]increase or decrease in demand means,

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so that you can recreate[br]this list on your own.

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Let's now go through five[br]factors. That can increase

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Decrease market demand[br]namely income population,

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tastes the price of related goods.

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And finally expectations.

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Let's start with changes in income,

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the effect of a change[br]in income on demand,

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depends on the nature of the good in question[br]for most Goods as your income goes up.

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You demand more of the[br]good think, for instance,

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fine. Dining you need to be[br]able to afford it, right.

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The demand curve then shifts up and to the[br]right these goods are called normal Goods

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because the demand for them[br]goes up when incomes go up

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and indeed most goods[br]are normal Goods, that's

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Why we call them normal?

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And the same Goods. The demand for[br]them goes down when incomes go down.

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There are also Goods. However,

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for which, when your income goes up,[br]your demand for them actually goes down.

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These are exceptions. We[br]call them inferior Goods.

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So, an example of such an inferior, good[br]might be instant Ramen, it's very cheap.

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As you make more money,[br]you might buy, say,

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more caviar, more steak,[br]and less instant Ramen.

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Thus, the demand curve for instant[br]Ramen will shift down into the left, as

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Your income increases.

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Now let's move on to changes in population[br]as the population of an economy changes.

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The number of potential buyers

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of a good changes. Also what would[br]happen to the demand for hearing aids?

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If the elderly population[br]in your country increased?

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Well very likely demand for[br]hearing aids would increase

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at any price for those hearing aids,[br]there would be a higher quantity demanded

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Can you think of a good that[br]would decrease in demand

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if the birth rates in[br]your country decreased?

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Now, we'll move on to changes in tastes.

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Tastes are subjective and[br]they're changing all the time.

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New information Fashions and fads all[br]can impact tastes to give an example.

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What happens to the demand for hamburgers?

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If low-carb diet, like the keto diet or[br]the caveman diet become more popular?

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Well, people would want to go out[br]and buy and eat more hamburgers.

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And so, the demand for[br]hamburgers would increase

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Lee,

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what if a controversy surfaced that[br]questioned the ethics of hamburger production?

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People might then feel bad[br]about buying hamburgers

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and then they would buy fewer hamburgers[br]or maybe stop buying them all together.

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The demand for hamburgers[br]then would go down.

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Next,

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let's consider how the price of a related[br]good can affect demand starting with

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substitute Goods.

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Now substitutes are two goods

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that are roughly interchangeable. They're[br]not the same but they can serve broadly,

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similar functions. Take for[br]instance, hot dogs and hamburgers.

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They're both something[br]you might have for dinner.

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Now in the setting suppose[br]the price of hot dogs goes up.

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What happens to the demand for[br]hamburgers. A substitute for hot dogs.

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People will opt to buy the relatively less[br]expensive hamburgers instead of the now.

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More expensive Hot Dogs.

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That means the demand[br]for hamburgers increases.

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Or consider the opposite. Occurrence.

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What if the price of hot dogs decreases[br]instead of going up? What happens then

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to the demand for hamburgers? Well, that's[br]just the opposite of the first scenario.

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Hot dogs are now cheaper and the[br]demand for hamburgers decreases

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because it now costs less[br]to buy hot dogs instead.

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Technically, two goods are substitutes.

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If an increase in the price of one,

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good leads to an increase in demand[br]for the other, good and vice versa.

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Another kind of related good is[br]what economists, call compliments,

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Compliments are two goods

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which are often used together and[br]make each other more valuable,

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suppose the price of hamburgers increases,

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what happens to the[br]demand for hamburger buns.

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We complement to hamburgers proper.

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Well, fewer, people will buy hamburgers

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and so fewer. People[br]will buy hamburger buns,

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the demand for hamburger buns, decreases.

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And to consider the opposite situation.

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If the price of hamburger decreases[br]demand for hamburger buns, will increase.

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That is more people.

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Buying hamburger means, more people, buying[br]hamburger buns as well because again,

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you're putting the hamburger[br]and the bun together.

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Technically, two goods are complements.

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If an increase in the price of one, good

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leads to a decrease in the demand[br]for the other and vice versa.

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So in some hamburger producers,

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want the price of hot dogs to go up

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the price of hamburger buns to go[br]down and low carb diets to go viral.

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Finally, let's look at expectations.

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These can be expectations of[br]market prices, or of Market events.

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Consider video game consoles.

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If it's November and people expect[br]the price of the gaming console,

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to go down and a December holiday sale.

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They might wait a few weeks[br]before buying the console

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demand for that console decreases today[br]because it's going to increase later on

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or take batteries.

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Suppose you here, there's going[br]to be a big hurricane in your area

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if a hurricane hits.

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You might expect the price of[br]batteries is going to go up

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or maybe it will be really hard[br]to get any batteries at all.

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Oh no. That means a higher[br]demand for Batteries today.

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And so, the expectation of this[br]future event of the hurricane

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can change the demand for Batteries today.

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If people expect the price of a[br]good to be higher in the future,

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that typically increases demand today,

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consumers adjust their current[br]spending anticipating the future prices

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to obtain the lowest price possible[br]and that's it for our list of shifters.

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Now that you understand what[br]a shift in demand means,

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practice recreating this[br]list of shifters on your own.

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What would cause a higher[br]quantity demanded at every price

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more people, wealthier people?

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Well, it's the hotter in item and so on.

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Conversely. What would cause less of[br]a good to be demanded at every price?

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Once you can do that, you'll be[br]able to identify demand shifters

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without the need to memorize any list.

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If you're a teacher,

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you should check out our supply and demand[br]unit plan that incorporates this video.

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If you're a learner,

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make sure this video sticks by answering[br]a few quick, practice questions,

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or if you're ready for more[br]microeconomics, click for the next video,