[Script Info]
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[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:01.03,0:00:04.79,Default,,0000,0000,0000,,In this video we're gonna talk about the law of demand
Dialogue: 0,0:00:04.80,0:00:07.71,Default,,0000,0000,0000,,which is one of the core ideas of micro-economics.
Dialogue: 0,0:00:07.71,0:00:10.52,Default,,0000,0000,0000,,And luckily for us, it is a fairly intuitive idea.
Dialogue: 0,0:00:10.52,0:00:16.60,Default,,0000,0000,0000,,It just tells us that if we raise the price of a product,
Dialogue: 0,0:00:16.60,0:00:21.62,Default,,0000,0000,0000,,that will lower the quantity demanded for the product.
Dialogue: 0,0:00:21.62,0:00:23.74,Default,,0000,0000,0000,,The quantity demanded will go down,
Dialogue: 0,0:00:23.74,0:00:25.87,Default,,0000,0000,0000,,and you can imagine the other side of that.
Dialogue: 0,0:00:25.87,0:00:31.00,Default,,0000,0000,0000,,If we lower the price of a product,
Dialogue: 0,0:00:31.00,0:00:36.86,Default,,0000,0000,0000,,that will raise the quantity demanded of that product.
Dialogue: 0,0:00:36.86,0:00:40.33,Default,,0000,0000,0000,,And the law of demand says, just kind of generally
Dialogue: 0,0:00:40.33,0:00:41.99,Default,,0000,0000,0000,,what we'll see in a few videos from now,
Dialogue: 0,0:00:41.99,0:00:44.97,Default,,0000,0000,0000,,that there are some exceptions to this.
Dialogue: 0,0:00:44.97,0:00:46.80,Default,,0000,0000,0000,,But to make this a little concrete,
Dialogue: 0,0:00:46.80,0:00:49.90,Default,,0000,0000,0000,,let's think about the demand for a certain product.
Dialogue: 0,0:00:49.90,0:00:52.00,Default,,0000,0000,0000,,And one thing I'm gonna clear here,
Dialogue: 0,0:00:52.00,0:00:55.13,Default,,0000,0000,0000,,and I want to take great pains to not mess this up,
Dialogue: 0,0:00:55.13,0:00:57.46,Default,,0000,0000,0000,,is that when we talk about the word DEMAND,
Dialogue: 0,0:00:57.46,0:00:59.82,Default,,0000,0000,0000,,in a formal economic sense,
Dialogue: 0,0:00:59.82,0:01:02.07,Default,,0000,0000,0000,,we're not talking about a quantity,
Dialogue: 0,0:01:02.07,0:01:03.37,Default,,0000,0000,0000,,we're actually gonna talk "all else equal",
Dialogue: 0,0:01:03.37,0:01:05.32,Default,,0000,0000,0000,,"ceterus perebus"
Dialogue: 0,0:01:05.32,0:01:10.05,Default,,0000,0000,0000,,all the relationship between price and quantity demanded.
Dialogue: 0,0:01:10.05,0:01:11.71,Default,,0000,0000,0000,,If we talk about an actual quantity,
Dialogue: 0,0:01:11.71,0:01:14.09,Default,,0000,0000,0000,,we should say the quantity demanded.
Dialogue: 0,0:01:14.09,0:01:18.15,Default,,0000,0000,0000,,So DEMAND vs QUANTITY DEMANDED,
Dialogue: 0,0:01:18.15,0:01:19.98,Default,,0000,0000,0000,,these are two different things.
Dialogue: 0,0:01:19.98,0:01:22.58,Default,,0000,0000,0000,,If it‘s a little confusing to you right now,
Dialogue: 0,0:01:22.58,0:01:23.77,Default,,0000,0000,0000,,hopefully by the end of this video
Dialogue: 0,0:01:23.77,0:01:25.66,Default,,0000,0000,0000,,the difference between demand and quantity demanded
Dialogue: 0,0:01:25.66,0:01:27.32,Default,,0000,0000,0000,,will become a little bit clearer,
Dialogue: 0,0:01:27.32,0:01:29.36,Default,,0000,0000,0000,,and definitely over the next few videos.
Dialogue: 0,0:01:29.36,0:01:31.71,Default,,0000,0000,0000,,Because in this video we're gonna focus on,
Dialogue: 0,0:01:31.71,0:01:34.86,Default,,0000,0000,0000,,how the quantity demanded changes relative to price.
Dialogue: 0,0:01:34.86,0:01:38.00,Default,,0000,0000,0000,,In future videos we'll talk about how the entire relationship,
Dialogue: 0,0:01:38.00,0:01:40.94,Default,,0000,0000,0000,,how demand changes based on different factors.
Dialogue: 0,0:01:40.94,0:01:42.66,Default,,0000,0000,0000,,But to make things concrete,
Dialogue: 0,0:01:42.66,0:01:47.71,Default,,0000,0000,0000,,let's say I'm about to release my science fiction book,
Dialogue: 0,0:01:47.71,0:01:50.84,Default,,0000,0000,0000,,space whatever..I don't know...the book I want to release..
Dialogue: 0,0:01:50.84,0:01:54.94,Default,,0000,0000,0000,,So I'm gonna release some e-book,
Dialogue: 0,0:01:54.94,0:01:56.52,Default,,0000,0000,0000,,And we've done some market study
Dialogue: 0,0:01:56.52,0:01:58.79,Default,,0000,0000,0000,,or we just know how the price is
Dialogue: 0,0:01:58.79,0:02:00.42,Default,,0000,0000,0000,,or how the demand is related to price,
Dialogue: 0,0:02:00.42,0:02:02.34,Default,,0000,0000,0000,,or price is related to demand.
Dialogue: 0,0:02:02.34,0:02:06.74,Default,,0000,0000,0000,,And we're gonna show that in a DEMAND SCHEDULE,
Dialogue: 0,0:02:06.74,0:02:08.61,Default,,0000,0000,0000,,which is really just a table
Dialogue: 0,0:02:08.61,0:02:09.70,Default,,0000,0000,0000,,that just shows
Dialogue: 0,0:02:09.70,0:02:15.06,Default,,0000,0000,0000,,how the price... and actually I made my first mistake.
Dialogue: 0,0:02:15.06,0:02:17.16,Default,,0000,0000,0000,,I just said how price relates to demand.
Dialogue: 0,0:02:17.16,0:02:20.55,Default,,0000,0000,0000,,I should say how price relates to quantity demanded,
Dialogue: 0,0:02:20.55,0:02:23.26,Default,,0000,0000,0000,,and how quantity demanded relates to price.
Dialogue: 0,0:02:23.26,0:02:26.24,Default,,0000,0000,0000,,So a demand schedule, it shows
Dialogue: 0,0:02:26.24,0:02:29.64,Default,,0000,0000,0000,,a relationship between price and quantity demanded.
Dialogue: 0,0:02:29.64,0:02:31.64,Default,,0000,0000,0000,,ALL ELSE EQUAL.
Dialogue: 0,0:02:31.64,0:02:36.25,Default,,0000,0000,0000,,So we're gonna have multiple scenarios here.
Dialogue: 0,0:02:36.25,0:02:39.49,Default,,0000,0000,0000,,So this column is for scenarios.
Dialogue: 0,0:02:39.51,0:02:41.49,Default,,0000,0000,0000,,This column let me put my price.
Dialogue: 0,0:02:41.49,0:02:50.52,Default,,0000,0000,0000,,This column I put my quantity demanded.
Dialogue: 0,0:02:50.52,0:02:52.15,Default,,0000,0000,0000,,So a scenario...
Dialogue: 0,0:02:52.15,0:02:54.38,Default,,0000,0000,0000,,Let's call this a scenario A.
Dialogue: 0,0:02:54.38,0:03:00.11,Default,,0000,0000,0000,,I could price my book at $2.
Dialogue: 0,0:03:00.11,0:03:02.72,Default,,0000,0000,0000,,And I'll get a ton of people downloading it at that price.
Dialogue: 0,0:03:02.72,0:03:05.76,Default,,0000,0000,0000,,So I will get 60,000 people
Dialogue: 0,0:03:05.76,0:03:09.50,Default,,0000,0000,0000,,download my book at that price my e-book.
Dialogue: 0,0:03:09.50,0:03:12.88,Default,,0000,0000,0000,,Scenario B, I could raise the price by $2.
Dialogue: 0,0:03:12.88,0:03:17.29,Default,,0000,0000,0000,,So it's now at $4 and then that kills off a lot of the demand.
Dialogue: 0,0:03:17.29,0:03:19.10,Default,,0000,0000,0000,,Now the quantity demanded goes down to
Dialogue: 0,0:03:19.10,0:03:21.64,Default,,0000,0000,0000,,40,000 people downloading it.
Dialogue: 0,0:03:21.64,0:03:23.37,Default,,0000,0000,0000,,Then I go to scenario C.
Dialogue: 0,0:03:23.37,0:03:25.05,Default,,0000,0000,0000,,If I raise by another $2,
Dialogue: 0,0:03:25.05,0:03:26.73,Default,,0000,0000,0000,,so now I'm at $6,
Dialogue: 0,0:03:26.73,0:03:32.33,Default,,0000,0000,0000,,that lowers the quantity demanded to 30,000.
Dialogue: 0,0:03:32.33,0:03:33.64,Default,,0000,0000,0000,,I will do a couple more of these.
Dialogue: 0,0:03:33.64,0:03:37.34,Default,,0000,0000,0000,,Scenario D, I raise another $2.
Dialogue: 0,0:03:37.34,0:03:39.77,Default,,0000,0000,0000,,So I get to $8 now.
Dialogue: 0,0:03:39.77,0:03:44.34,Default,,0000,0000,0000,,Now the quantity demanded goes down to 25,000.
Dialogue: 0,0:03:44.34,0:03:46.25,Default,,0000,0000,0000,,And I'll do one more of these
Dialogue: 0,0:03:46.25,0:03:47.98,Default,,0000,0000,0000,,-See what color I haven't used yet-
Dialogue: 0,0:03:47.98,0:03:49.60,Default,,0000,0000,0000,,-I haven't used yellow yet-
Dialogue: 0,0:03:49.60,0:03:52.83,Default,,0000,0000,0000,,Scenario E, I raise it to $10.
Dialogue: 0,0:03:52.83,0:03:59.71,Default,,0000,0000,0000,,Now the quantity demanded let's just say it is 23,000.
Dialogue: 0,0:03:59.71,0:04:02.80,Default,,0000,0000,0000,,So this relationship,
Dialogue: 0,0:04:02.80,0:04:05.24,Default,,0000,0000,0000,,this shows the law of demand right over here.
Dialogue: 0,0:04:05.24,0:04:06.77,Default,,0000,0000,0000,,And this table that shows,
Dialogue: 0,0:04:06.77,0:04:09.38,Default,,0000,0000,0000,,how the quantity demanded relates to price and vice versa.
Dialogue: 0,0:04:09.38,0:04:11.53,Default,,0000,0000,0000,,This is what we call the DEMAND SCHEDULE.
Dialogue: 0,0:04:11.53,0:04:14.80,Default,,0000,0000,0000,,Now we can also, based on this demand schedule,
Dialogue: 0,0:04:14.80,0:04:16.30,Default,,0000,0000,0000,,draw a DEMAND CURVE.
Dialogue: 0,0:04:16.30,0:04:18.20,Default,,0000,0000,0000,,We're really just gonna plot these points and
Dialogue: 0,0:04:18.20,0:04:20.72,Default,,0000,0000,0000,,draw the curve that connects them
Dialogue: 0,0:04:20.72,0:04:23.37,Default,,0000,0000,0000,,because these aren't the only scenarios.
Dialogue: 0,0:04:23.37,0:04:24.66,Default,,0000,0000,0000,,Anything between them is also possible.
Dialogue: 0,0:04:24.66,0:04:26.09,Default,,0000,0000,0000,,We could charge $2.01 for the book.
Dialogue: 0,0:04:26.09,0:04:28.31,Default,,0000,0000,0000,,We could charge $4.50 for the book.
Dialogue: 0,0:04:28.31,0:04:31.27,Default,,0000,0000,0000,,And so that‘s what the demand curve captures a little bit better,
Dialogue: 0,0:04:31.27,0:04:34.03,Default,,0000,0000,0000,,because it’s a continuous curve and not just 5 points.
Dialogue: 0,0:04:34.03,0:04:35.81,Default,,0000,0000,0000,,So let's do that.
Dialogue: 0,0:04:35.81,0:04:37.10,Default,,0000,0000,0000,,Let’s graph it.
Dialogue: 0,0:04:37.10,0:04:39.44,Default,,0000,0000,0000,,And this is one of those conventions of economics
Dialogue: 0,0:04:39.44,0:04:41.28,Default,,0000,0000,0000,,that I am not a fan of,
Dialogue: 0,0:04:41.28,0:04:45.51,Default,,0000,0000,0000,,because people often talk about changing the price
Dialogue: 0,0:04:45.51,0:04:48.82,Default,,0000,0000,0000,,and how the quantity demanded changes from that.
Dialogue: 0,0:04:48.82,0:04:51.46,Default,,0000,0000,0000,,And in traditional...in most of math and science,
Dialogue: 0,0:04:51.46,0:04:52.40,Default,,0000,0000,0000,,the thing that you're changing
Dialogue: 0,0:04:52.40,0:04:54.59,Default,,0000,0000,0000,,you normally put on the horizontal axis.
Dialogue: 0,0:04:54.59,0:04:58.12,Default,,0000,0000,0000,,So if I was in charge of the convention of economics
Dialogue: 0,0:04:58.12,0:05:02.10,Default,,0000,0000,0000,,I would plot price on the horizontal axis right over here.
Dialogue: 0,0:05:02.10,0:05:03.94,Default,,0000,0000,0000,,But the way it's done typically
Dialogue: 0,0:05:03.94,0:05:06.34,Default,,0000,0000,0000,,is that price is done on the vertical axis.
Dialogue: 0,0:05:06.34,0:05:07.97,Default,,0000,0000,0000,,So you're used to seeing it
Dialogue: 0,0:05:07.97,0:05:09.74,Default,,0000,0000,0000,,in kind of the traditional class environment.
Dialogue: 0,0:05:09.74,0:05:10.98,Default,,0000,0000,0000,,I'll do the same.
Dialogue: 0,0:05:10.98,0:05:13.34,Default,,0000,0000,0000,,So we'll put price in the vertical axis
Dialogue: 0,0:05:13.34,0:05:21.40,Default,,0000,0000,0000,,and we'll put quantity demanded in the horizontal axis.
Dialogue: 0,0:05:21.40,0:05:23.82,Default,,0000,0000,0000,,And now the quantity demanded goes all the way up to 60,000.
Dialogue: 0,0:05:23.82,0:05:29.75,Default,,0000,0000,0000,,So that's a 10..20..30..40..50..60
Dialogue: 0,0:05:29.75,0:05:31.82,Default,,0000,0000,0000,,So it's 10 ... this is in thousands
Dialogue: 0,0:05:31.82,0:05:38.26,Default,,0000,0000,0000,,20...30...sorry not 45...40...50 and 60
Dialogue: 0,0:05:38.26,0:05:41.49,Default,,0000,0000,0000,,and this is in thousands.
Dialogue: 0,0:05:41.49,0:05:43.87,Default,,0000,0000,0000,,And the price goes up to $10
Dialogue: 0,0:05:43.87,0:05:45.10,Default,,0000,0000,0000,,from $2 to $10.
Dialogue: 0,0:05:45.10,0:05:55.33,Default,,0000,0000,0000,,Let's say this is 2..4..6..8 and 10.
Dialogue: 0,0:05:55.33,0:05:57.66,Default,,0000,0000,0000,,So let's plot the scenarios.
Dialogue: 0,0:05:57.66,0:06:00.74,Default,,0000,0000,0000,,So Scenario A, price is $2
Dialogue: 0,0:06:00.74,0:06:03.10,Default,,0000,0000,0000,,60,000 units are demanded.
Dialogue: 0,0:06:03.10,0:06:06.00,Default,,0000,0000,0000,,That is Scenario A, right over there.
Dialogue: 0,0:06:06.00,0:06:09.18,Default,,0000,0000,0000,,Scenario B, when the price is $4,
Dialogue: 0,0:06:09.18,0:06:11.45,Default,,0000,0000,0000,,40,000 units are demanded.
Dialogue: 0,0:06:11.45,0:06:15.04,Default,,0000,0000,0000,,$4, 40,000 units that's right over there.
Dialogue: 0,0:06:15.04,0:06:16.39,Default,,0000,0000,0000,,That's Scenario B.
Dialogue: 0,0:06:16.39,0:06:25.65,Default,,0000,0000,0000,,Scenario C, $6, 30,000 units.
Dialogue: 0,0:06:25.65,0:06:28.90,Default,,0000,0000,0000,,Scenario D, $8, 25,000 units.
Dialogue: 0,0:06:28.90,0:06:32.83,Default,,0000,0000,0000,,$8, 25 is right about there.
Dialogue: 0,0:06:32.83,0:06:36.16,Default,,0000,0000,0000,,That looks like 25,000 right in between. That's close enough.
Dialogue: 0,0:06:36.16,0:06:39.97,Default,,0000,0000,0000,,So that right over there is Scenario D.
Dialogue: 0,0:06:39.97,0:06:41.85,Default,,0000,0000,0000,,And then finally Scenario E,
Dialogue: 0,0:06:41.85,0:06:46.71,Default,,0000,0000,0000,,$10, 23,000 units.
Dialogue: 0,0:06:46.71,0:06:49.19,Default,,0000,0000,0000,,So that would be something like that.
Dialogue: 0,0:06:49.19,0:06:51.08,Default,,0000,0000,0000,,That is Scenario E.
Dialogue: 0,0:06:51.08,0:06:53.71,Default,,0000,0000,0000,,And so we can actually have prices anywhere between them
Dialogue: 0,0:06:53.71,0:06:55.03,Default,,0000,0000,0000,,and maybe we can go even further.
Dialogue: 0,0:06:55.03,0:06:56.74,Default,,0000,0000,0000,,So this right over here.
Dialogue: 0,0:06:56.74,0:06:58.56,Default,,0000,0000,0000,,So if I were to draw the demand curve,
Dialogue: 0,0:06:58.56,0:07:00.61,Default,,0000,0000,0000,,it could look something like this.
Dialogue: 0,0:07:00.61,0:07:03.55,Default,,0000,0000,0000,,A demand curve would look something,
Dialogue: 0,0:07:03.55,0:07:06.90,Default,,0000,0000,0000,,-I'm trying to do my best to draw a straight continuous line-
Dialogue: 0,0:07:06.90,0:07:08.94,Default,,0000,0000,0000,,could look something like that.
Dialogue: 0,0:07:08.94,0:07:10.99,Default,,0000,0000,0000,,It could keep going on and on.
Dialogue: 0,0:07:10.99,0:07:13.99,Default,,0000,0000,0000,,And so these are two ways to show demand.
Dialogue: 0,0:07:13.99,0:07:16.10,Default,,0000,0000,0000,,So I'm just going back to what I said earlier.
Dialogue: 0,0:07:16.10,0:07:20.91,Default,,0000,0000,0000,,The quantity demanded is, all else equal, for a given price,
Dialogue: 0,0:07:20.91,0:07:23.27,Default,,0000,0000,0000,,how many units people are willing to download
Dialogue: 0,0:07:23.27,0:07:25.63,Default,,0000,0000,0000,,or buy of my e-book.
Dialogue: 0,0:07:25.63,0:07:30.37,Default,,0000,0000,0000,,When we talk about the demand itself,
Dialogue: 0,0:07:30.37,0:07:33.02,Default,,0000,0000,0000,,we're talking about this entire relationship.
Dialogue: 0,0:07:33.02,0:07:34.52,Default,,0000,0000,0000,,So this demand itself,
Dialogue: 0,0:07:34.52,0:07:36.41,Default,,0000,0000,0000,,is this entire demand schedule.
Dialogue: 0,0:07:36.41,0:07:37.59,Default,,0000,0000,0000,,Or another way to think of it is,
Dialogue: 0,0:07:37.59,0:07:39.29,Default,,0000,0000,0000,,is this entire demand curve.
Dialogue: 0,0:07:39.29,0:07:42.81,Default,,0000,0000,0000,,If demand were to change,
Dialogue: 0,0:07:42.81,0:07:45.12,Default,,0000,0000,0000,,we would actually have a different curve.
Dialogue: 0,0:07:45.12,0:07:46.70,Default,,0000,0000,0000,,This curve would shift
Dialogue: 0,0:07:46.70,0:07:49.67,Default,,0000,0000,0000,,or the entries in this table would shift.
Dialogue: 0,0:07:49.67,0:07:52.02,Default,,0000,0000,0000,,If the quantity of demand changes,
Dialogue: 0,0:07:52.02,0:07:53.42,Default,,0000,0000,0000,,we move along this curve.
Dialogue: 0,0:07:53.42,0:07:54.86,Default,,0000,0000,0000,,When you hold everything else equal
Dialogue: 0,0:07:54.86,0:07:57.28,Default,,0000,0000,0000,,and you only change price.
Dialogue: 0,0:07:57.28,0:07:58.92,Default,,0000,0000,0000,,So hopefully that makes that clear.
Dialogue: 0,0:07:58.92,0:08:01.11,Default,,0000,0000,0000,,When everything else is equal
Dialogue: 0,0:08:01.11,0:08:02.54,Default,,0000,0000,0000,,and you're only changing price,
Dialogue: 0,0:08:02.54,0:08:04.08,Default,,0000,0000,0000,,you're not changing demand.
Dialogue: 0,0:08:04.08,0:08:05.78,Default,,0000,0000,0000,,You're changing the quantity demanded.
Dialogue: 0,0:08:05.78,0:08:07.97,Default,,0000,0000,0000,,The demand, because everything else is equal,
Dialogue: 0,0:08:07.97,0:08:09.62,Default,,0000,0000,0000,,is this relationship.
Dialogue: 0,0:08:09.62,0:08:10.75,Default,,0000,0000,0000,,In the next few videos,
Dialogue: 0,0:08:10.75,0:08:12.25,Default,,0000,0000,0000,,we'll think about what does happen,
Dialogue: 0,0:08:12.25,0:08:16.00,Default,,0000,0000,0000,,when you do change some of those other factors.