The Demand Curve Shifts

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

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

due to increases or decreases
in market demand.

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

An increase in demand

means that the demand curve
shifts up and to the right.

Take the market
for house plants, for instance.

On the old demand curve at $20,

the quantity demanded
was five plants,

but on the new demand curve
at, again, $20,

the quantity demanded
is eight plants.

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

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

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

We can also read
an increase in demand

using what is called
the vertical method.

What that means
is that for every quantity,

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

For instance, for the fifth unit,

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

Now with the new demand curve,

people are willing to pay
$32 for that unit.

In summary, an increase in demand

means an increase
in the quantity demanded

at every market price,

or equivalently,
it means an increase

in the maximum willingness
to pay for a given quantity.

A decrease in demand.

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

and to the left.

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

people only want to buy two houseplants

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

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

for the fifth unit people were willing to

I pay $20 for that unit

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

So what can cause a shift in demand?

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

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

but the real goal is not
to memorize this list.

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

so that you can recreate
this list on your own.

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

Decrease market demand
namely income population,

tastes the price of related goods.

And finally expectations.

Let's start with changes in income,

the effect of a change
in income on demand,

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

You demand more of the
good think, for instance,

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

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

because the demand for them
goes up when incomes go up

and indeed most goods
are normal Goods, that's

Why we call them normal?

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

There are also Goods. However,

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

These are exceptions. We
call them inferior Goods.

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

As you make more money,
you might buy, say,

more caviar, more steak,
and less instant Ramen.

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

Your income increases.

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

The number of potential buyers

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

If the elderly population
in your country increased?

Well very likely demand for
hearing aids would increase

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

Can you think of a good that
would decrease in demand

if the birth rates in
your country decreased?

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

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

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

What happens to the demand for hamburgers?

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

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

And so, the demand for
hamburgers would increase

Lee,

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

People might then feel bad
about buying hamburgers

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

The demand for hamburgers
then would go down.

Next,

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

substitute Goods.

Now substitutes are two goods

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

similar functions. Take for
instance, hot dogs and hamburgers.

They're both something
you might have for dinner.

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

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

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

More expensive Hot Dogs.

That means the demand
for hamburgers increases.

Or consider the opposite. Occurrence.

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

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

Hot dogs are now cheaper and the
demand for hamburgers decreases

because it now costs less
to buy hot dogs instead.

Technically, two goods are substitutes.

If an increase in the price of one,

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

Another kind of related good is
what economists, call compliments,

Compliments are two goods

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

suppose the price of hamburgers increases,

what happens to the
demand for hamburger buns.

We complement to hamburgers proper.

Well, fewer, people will buy hamburgers

and so fewer. People
will buy hamburger buns,

the demand for hamburger buns, decreases.

And to consider the opposite situation.

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

That is more people.

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

you're putting the hamburger
and the bun together.

Technically, two goods are complements.

If an increase in the price of one, good

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

So in some hamburger producers,

want the price of hot dogs to go up

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

Finally, let's look at expectations.

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

Consider video game consoles.

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

to go down and a December holiday sale.

They might wait a few weeks
before buying the console

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

or take batteries.

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

if a hurricane hits.

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

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

Oh no. That means a higher
demand for Batteries today.

And so, the expectation of this
future event of the hurricane

can change the demand for Batteries today.

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

that typically increases demand today,

consumers adjust their current
spending anticipating the future prices

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

Now that you understand what
a shift in demand means,

practice recreating this
list of shifters on your own.

What would cause a higher
quantity demanded at every price

more people, wealthier people?

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

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

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

without the need to memorize any list.

If you're a teacher,

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

If you're a learner,

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

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