Shifting Demand and Supply- Econ 2.3

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!

Ah!

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.