Changes in Income, Population, or Preferences

How demand can be effected by changes in income, population or preferences

So, we've been going through all of the others things

that we were assuming are held constant

in order to be moving along one demand curve.

And now let's list a few other[s].

And before I do any more of them,

let's talk about the ones we already talked about.

So – one– we said that one of the things we held constant –

(Let me write this down.)

So – (WRITING: held constant.)

One of the things that we held constant to move along

one demand curve, for the demand itself not to shift –

for the curve not to shift –

is price of related goods. [WRITING]

The other thing we assumed that's being held constant

is price expectations for our good. [WRITING]

And now we'll list a couple of them that are fairly intuitive.

But you'll see that in the next few videos,

that there are often special cases even to this.

So, the other thing that we've been holding constant

to stay on one demand curve is income.

And this one is fairly intuitive.

What happens if everyone's income were to increase?

And, in real terms, it were to actually increase?

Well, then, all of a sudden,

they have more disposable income –

naybe to spend on something like e-books.

And so, for any given price point,

the demand would increase.

And so, it would increase the demand.

And once again, when we talk about increasing demand,

we're talking about shifting the entire curve.

We're not talking about a particular quantity of demand.

So, income goes up, then [that] increases demand.

[WRITING] Demand goes up.

And remember ... when demand goes up,

we're talking about the whole curve shifting to the right.

At any given price point,

we are going to have a larger quantity demanded.

So the whole curve,

this whole demand schedule would change.

And likewise, if income went down, demand would go down.

And [as] we're going to see in a future video,

it's actually quite interesting,

that's not, always ... the case.

This is only true for normal goods.

[WRITING] "normal goods."

And in a future video we'll see goods called "inferior goods,"

where this is NOT necessarily the case.

Or, by definition, for an inferior good,

it would not be the case.

Now the other ones that are somewhat intuitive

are population. [WRITING]

Once again, if population goes up --

obviously -- at any given price point,

more people will want it.

So, it would shift the demand curve to the right --

or it would increase demand.

If population were to go down, it would decrease demand,

which means shifting the whole curve to the left.

And then the last one we'll talk about --

And remember, we're holding all these things constant

in order for demand not to change.

The last thing is just preferences.

We're assuming that people's tastes

and preferences don't change

while we move along a specific demand curve.

If preferences actually change, then it will change the curve.

So, for example, if, all of a sudden ... the author of [a] book

is on some very popular show --

talk show -- that tells everyone

that this is the best book that was ever written,

then preferences would go up,

and that would increase the total demand.

At any given price point,

more people would be willing to buy the book.

If, on the other hand, on that same talk show,

it turns out that they do an exposé

on the author having this sordid past

and [they state that] the author plagiarized the whole book,

then the demand will go down.

The entire curve, regardless of the price point --

at any given price point --

the quantity demanded will actually go down.