WEBVTT

00:00:12.500 --> 00:00:16.300
In previous videos, we've covered
the basics of the demand curve.

00:00:16.300 --> 00:00:19.700
Now let's discuss what happens
when the demand curve shifts

00:00:20.000 --> 00:00:23.026
due to increases or decreases
in market demand.

00:00:23.026 --> 00:00:26.100
First, let's look at
an increase in demand.

00:00:26.700 --> 00:00:28.057
An increase in demand

00:00:28.057 --> 00:00:31.600
means that the demand curve
shifts up and to the right.

00:00:32.400 --> 00:00:35.250
Take the market
for house plants, for instance.

00:00:35.250 --> 00:00:38.100
On the old demand curve at $20,

00:00:38.400 --> 00:00:41.572
the quantity demanded
was five plants,

00:00:41.572 --> 00:00:44.991
but on the new demand curve
at, again, $20,

00:00:44.991 --> 00:00:47.413
the quantity demanded
is eight plants.

00:00:48.500 --> 00:00:52.200
At $16, we go from six plants
to nine plants.

00:00:53.500 --> 00:00:57.500
At $12, we go from seven
to ten plants, and so on.

00:00:57.900 --> 00:01:02.400
An increase in demand is a greater
quantity demanded at every price.

00:01:03.000 --> 00:01:05.303
We can also read
an increase in demand

00:01:05.303 --> 00:01:07.800
using what is called
the vertical method.

00:01:08.000 --> 00:01:10.100
What that means
is that for every quantity,

00:01:10.300 --> 00:01:13.200
there's a greater willingness
to pay for that quantity.

00:01:13.500 --> 00:01:15.628
For instance, for the fifth unit,

00:01:15.628 --> 00:01:19.100
people had been willing
to pay $20 for that unit.

00:01:19.300 --> 00:01:20.992
Now with the new demand curve,

00:01:20.992 --> 00:01:24.393
people are willing to pay
$32 for that unit.

00:01:25.100 --> 00:01:27.500
In summary, an increase in demand

00:01:27.500 --> 00:01:30.136
means an increase
in the quantity demanded

00:01:30.136 --> 00:01:32.148
at every market price,

00:01:32.148 --> 00:01:34.757
or equivalently, 
it means an increase

00:01:34.757 --> 00:01:38.273
in the maximum willingness
to pay for a given quantity.

00:01:39.400 --> 00:01:40.700
A decrease in demand.

00:01:40.800 --> 00:01:44.900
Well, that's just the opposite of an
increase in demand. It's a shift down

00:01:45.000 --> 00:01:46.000
and to the left.

00:01:46.600 --> 00:01:52.100
There is a decrease in quantity
demanded at every price now at $20,

00:01:52.300 --> 00:01:55.200
people only want to buy two houseplants

00:01:56.100 --> 00:02:00.300
at $16. We go from six to
three house plants and so on.

00:02:01.100 --> 00:02:06.400
Similarly, this means a decrease in the
willingness to pay for the same quantity

00:02:06.800 --> 00:02:09.100
for the fifth unit people were willing to

00:02:09.200 --> 00:02:11.200
I pay $20 for that unit

00:02:11.300 --> 00:02:14.900
but now they're only going to Fork
over eight dollars for that house plan.

00:02:16.500 --> 00:02:19.400
So what can cause a shift in demand?

00:02:20.000 --> 00:02:24.100
What would make consumers, buy more
or less of a good at every price.

00:02:24.800 --> 00:02:32.000
Take a moment to jot down. Some guesses
will go through these with a few examples,

00:02:32.100 --> 00:02:34.900
but the real goal is not
to memorize this list.

00:02:35.200 --> 00:02:39.600
But rather to understand what an
increase or decrease in demand means,

00:02:39.900 --> 00:02:42.500
so that you can recreate
this list on your own.

00:02:43.000 --> 00:02:46.200
Let's now go through five
factors. That can increase

00:02:46.300 --> 00:02:50.900
Decrease market demand
namely income population,

00:02:51.000 --> 00:02:53.600
tastes the price of related goods.

00:02:53.700 --> 00:02:55.600
And finally expectations.

00:02:56.600 --> 00:02:58.900
Let's start with changes in income,

00:02:59.500 --> 00:03:02.300
the effect of a change
in income on demand,

00:03:02.400 --> 00:03:07.800
depends on the nature of the good in question
for most Goods as your income goes up.

00:03:07.900 --> 00:03:11.000
You demand more of the
good think, for instance,

00:03:11.100 --> 00:03:14.000
fine. Dining you need to be
able to afford it, right.

00:03:14.800 --> 00:03:20.400
The demand curve then shifts up and to the
right these goods are called normal Goods

00:03:20.800 --> 00:03:23.900
because the demand for them
goes up when incomes go up

00:03:23.900 --> 00:03:26.300
and indeed most goods
are normal Goods, that's

00:03:26.500 --> 00:03:27.800
Why we call them normal?

00:03:28.300 --> 00:03:33.700
And the same Goods. The demand for
them goes down when incomes go down.

00:03:34.900 --> 00:03:36.400
There are also Goods. However,

00:03:36.700 --> 00:03:41.200
for which, when your income goes up,
your demand for them actually goes down.

00:03:41.700 --> 00:03:44.800
These are exceptions. We
call them inferior Goods.

00:03:45.200 --> 00:03:51.100
So, an example of such an inferior, good
might be instant Ramen, it's very cheap.

00:03:52.000 --> 00:03:54.500
As you make more money,
you might buy, say,

00:03:54.600 --> 00:03:59.000
more caviar, more steak,
and less instant Ramen.

00:03:59.700 --> 00:04:04.600
Thus, the demand curve for instant
Ramen will shift down into the left, as

00:04:04.600 --> 00:04:06.000
Your income increases.

00:04:06.800 --> 00:04:13.400
Now let's move on to changes in population
as the population of an economy changes.

00:04:13.700 --> 00:04:15.700
The number of potential buyers

00:04:15.800 --> 00:04:21.000
of a good changes. Also what would
happen to the demand for hearing aids?

00:04:21.100 --> 00:04:24.400
If the elderly population
in your country increased?

00:04:24.600 --> 00:04:27.900
Well very likely demand for
hearing aids would increase

00:04:28.300 --> 00:04:33.100
at any price for those hearing aids,
there would be a higher quantity demanded

00:04:38.900 --> 00:04:41.600
Can you think of a good that
would decrease in demand

00:04:41.700 --> 00:04:44.000
if the birth rates in
your country decreased?

00:04:45.200 --> 00:04:48.000
Now, we'll move on to changes in tastes.

00:04:48.300 --> 00:04:51.100
Tastes are subjective and
they're changing all the time.

00:04:51.400 --> 00:04:57.300
New information Fashions and fads all
can impact tastes to give an example.

00:04:57.700 --> 00:05:00.000
What happens to the demand for hamburgers?

00:05:00.000 --> 00:05:05.600
If low-carb diet, like the keto diet or
the caveman diet become more popular?

00:05:06.200 --> 00:05:10.100
Well, people would want to go out
and buy and eat more hamburgers.

00:05:10.200 --> 00:05:13.400
And so, the demand for
hamburgers would increase

00:05:15.000 --> 00:05:15.300
Lee,

00:05:15.600 --> 00:05:20.600
what if a controversy surfaced that
questioned the ethics of hamburger production?

00:05:21.100 --> 00:05:23.900
People might then feel bad
about buying hamburgers

00:05:24.100 --> 00:05:28.400
and then they would buy fewer hamburgers
or maybe stop buying them all together.

00:05:28.900 --> 00:05:31.900
The demand for hamburgers
then would go down.

00:05:33.300 --> 00:05:33.800
Next,

00:05:34.300 --> 00:05:39.500
let's consider how the price of a related
good can affect demand starting with

00:05:39.800 --> 00:05:40.900
substitute Goods.

00:05:41.500 --> 00:05:43.400
Now substitutes are two goods

00:05:43.700 --> 00:05:47.700
that are roughly interchangeable. They're
not the same but they can serve broadly,

00:05:47.800 --> 00:05:51.500
similar functions. Take for
instance, hot dogs and hamburgers.

00:05:51.800 --> 00:05:54.000
They're both something
you might have for dinner.

00:05:54.500 --> 00:05:58.000
Now in the setting suppose
the price of hot dogs goes up.

00:05:58.500 --> 00:06:02.400
What happens to the demand for
hamburgers. A substitute for hot dogs.

00:06:03.100 --> 00:06:08.900
People will opt to buy the relatively less
expensive hamburgers instead of the now.

00:06:09.000 --> 00:06:10.700
More expensive Hot Dogs.

00:06:13.100 --> 00:06:15.900
That means the demand
for hamburgers increases.

00:06:17.000 --> 00:06:19.200
Or consider the opposite. Occurrence.

00:06:19.700 --> 00:06:24.700
What if the price of hot dogs decreases
instead of going up? What happens then

00:06:24.800 --> 00:06:29.300
to the demand for hamburgers? Well, that's
just the opposite of the first scenario.

00:06:29.500 --> 00:06:33.800
Hot dogs are now cheaper and the
demand for hamburgers decreases

00:06:33.900 --> 00:06:37.100
because it now costs less
to buy hot dogs instead.

00:06:38.000 --> 00:06:40.500
Technically, two goods are substitutes.

00:06:40.600 --> 00:06:42.400
If an increase in the price of one,

00:06:42.400 --> 00:06:47.000
good leads to an increase in demand
for the other, good and vice versa.

00:06:48.300 --> 00:06:52.200
Another kind of related good is
what economists, call compliments,

00:06:52.700 --> 00:06:54.100
Compliments are two goods

00:06:54.200 --> 00:06:57.800
which are often used together and
make each other more valuable,

00:06:58.300 --> 00:07:01.000
suppose the price of hamburgers increases,

00:07:01.600 --> 00:07:04.600
what happens to the
demand for hamburger buns.

00:07:04.800 --> 00:07:07.100
We complement to hamburgers proper.

00:07:07.900 --> 00:07:10.600
Well, fewer, people will buy hamburgers

00:07:11.000 --> 00:07:14.000
and so fewer. People
will buy hamburger buns,

00:07:14.300 --> 00:07:17.700
the demand for hamburger buns, decreases.

00:07:18.600 --> 00:07:21.200
And to consider the opposite situation.

00:07:21.500 --> 00:07:26.600
If the price of hamburger decreases
demand for hamburger buns, will increase.

00:07:27.000 --> 00:07:28.300
That is more people.

00:07:28.300 --> 00:07:32.800
Buying hamburger means, more people, buying
hamburger buns as well because again,

00:07:32.800 --> 00:07:35.200
you're putting the hamburger
and the bun together.

00:07:35.800 --> 00:07:38.100
Technically, two goods are complements.

00:07:38.300 --> 00:07:40.500
If an increase in the price of one, good

00:07:40.600 --> 00:07:44.600
leads to a decrease in the demand
for the other and vice versa.

00:07:45.400 --> 00:07:47.500
So in some hamburger producers,

00:07:47.600 --> 00:07:49.600
want the price of hot dogs to go up

00:07:49.900 --> 00:07:54.600
the price of hamburger buns to go
down and low carb diets to go viral.

00:07:54.900 --> 00:07:57.400
Finally, let's look at expectations.

00:07:57.800 --> 00:08:01.800
These can be expectations of
market prices, or of Market events.

00:08:02.000 --> 00:08:04.000
Consider video game consoles.

00:08:04.500 --> 00:08:08.100
If it's November and people expect
the price of the gaming console,

00:08:08.300 --> 00:08:11.000
to go down and a December holiday sale.

00:08:11.400 --> 00:08:14.300
They might wait a few weeks
before buying the console

00:08:15.000 --> 00:08:20.300
demand for that console decreases today
because it's going to increase later on

00:08:21.200 --> 00:08:22.600
or take batteries.

00:08:22.900 --> 00:08:26.100
Suppose you here, there's going
to be a big hurricane in your area

00:08:26.800 --> 00:08:28.000
if a hurricane hits.

00:08:28.200 --> 00:08:31.400
You might expect the price of
batteries is going to go up

00:08:31.600 --> 00:08:34.800
or maybe it will be really hard
to get any batteries at all.

00:08:34.900 --> 00:08:38.400
Oh no. That means a higher
demand for Batteries today.

00:08:38.600 --> 00:08:41.900
And so, the expectation of this
future event of the hurricane

00:08:42.000 --> 00:08:44.700
can change the demand for Batteries today.

00:08:45.600 --> 00:08:49.100
If people expect the price of a
good to be higher in the future,

00:08:49.600 --> 00:08:52.300
that typically increases demand today,

00:08:52.700 --> 00:08:56.900
consumers adjust their current
spending anticipating the future prices

00:08:57.100 --> 00:09:01.900
to obtain the lowest price possible
and that's it for our list of shifters.

00:09:02.700 --> 00:09:05.600
Now that you understand what
a shift in demand means,

00:09:05.800 --> 00:09:09.100
practice recreating this
list of shifters on your own.

00:09:09.900 --> 00:09:13.300
What would cause a higher
quantity demanded at every price

00:09:13.600 --> 00:09:15.200
more people, wealthier people?

00:09:15.400 --> 00:09:17.800
Well, it's the hotter in item and so on.

00:09:18.400 --> 00:09:23.500
Conversely. What would cause less of
a good to be demanded at every price?

00:09:24.100 --> 00:09:28.000
Once you can do that, you'll be
able to identify demand shifters

00:09:28.200 --> 00:09:31.000
without the need to memorize any list.

00:09:33.400 --> 00:09:34.300
If you're a teacher,

00:09:34.300 --> 00:09:38.100
you should check out our supply and demand
unit plan that incorporates this video.

00:09:38.400 --> 00:09:39.300
If you're a learner,

00:09:39.400 --> 00:09:43.200
make sure this video sticks by answering
a few quick, practice questions,

00:09:43.600 --> 00:09:47.200
or if you're ready for more
microeconomics, click for the next video,