The Demand Curve Shifts
-
Not Synced[Tyler] In our previous videos,
-
Not Syncedwe covered the basics
of the demand curve. -
Not SyncedNow we get to dive into
what happens -
Not Syncedwhen the demand curve shifts
-
Not Synceddue to increases or decreases
in market demand. -
Not SyncedRemember that a demand curve
is a function -
Not Syncedwhich shows the quantity demanded
at different prices. -
Not SyncedAnd the quantity demanded
is the quantity -
Not Syncedthat buyers are willing
and able to purchase -
Not Syncedat a particular price.
-
Not SyncedWe said last time
that an increase in demand meands -
Not Synceda shifting out of the demand curve,
-
Not Synceda movement toward the northeast
away from the origin. -
Not SyncedNow let's look at that more closely.
-
Not SyncedAn increase in demand means
there's a greater quantity demanded -
Not Syncedat every price.
-
Not SyncedFor example,
-
Not Syncedon the old demand curve
at a price of $25, -
Not Syncedpeople were willing
and able to purchase 70 units. -
Not SyncedOn the new demand curve
at that same price of $25, -
Not Syncedpeople are now willing
and able to purchase 80 units. -
Not SyncedAn increase in demand
is a greater quantity demanded -
Not Syncedat the same price.
-
Not SyncedWe can also read
an increase in demand -
Not Syncedusing the vertical method.
-
Not SyncedWhat that means is that
in every quantity -
Not Syncedthere is a greater willingness to
pay for that quantity. -
Not SyncedFor example, for the 70th unit,
-
Not Syncedpeople were willing to pay $25
for that unit. -
Not SyncedNow with the new demand curve,
-
Not Syncedpeople are willing to pay $50
for that unit. -
Not SyncedThat's a greater willingness to pay
for the same quantity -
Not Syncedand this is what
an increase in demand means. -
Not SyncedTo review because this is important,
-
Not Syncedan increase in demand means
an increase in the quantity demanded -
Not Syncedat every price,
-
Not Syncedor equivalently it means
an increase -
Not Syncedin the maximum willingness to pay
for a given quantity. -
Not SyncedWhat would cause an increase
in demand? -
Not SyncedThe answer is anything that increases
the quantity demanded -
Not Syncedat a given price
-
Not Syncedor that which increases
the maximum willingness to pay -
Not Syncedfor a given quantity.
-
Not SyncedFor instance, can you think
of some factors -
Not Syncedwhich would make consumers
willing to pay more for a good? -
Not SyncedCan you think of a factor
which would make consumers want -
Not Synceda greater quantity at a fixed price?
-
Not SyncedThose are the types of factors
-
Not Syncedwhich are going to shift
the demand curve. -
Not SyncedNow in a minute
I'm going to give you a list -
Not Syncedof such possible factors
-
Not Syncedbut I don't want you to memorize
this list. -
Not SyncedInstead, I want you to understand
what an increase in demand means. -
Not SyncedIf you understand,
-
Not Syncedthen you'll always be able
to recreate such a list on the fly. -
Not SyncedNow, here are some examples
of important demand shifters. -
Not SyncedFor instance, changes in income
and changes in population. -
Not SyncedCan you see through our example
how an increase in income -
Not Syncedmight cause people
to be willing to pay more -
Not Syncedfor a given quantity of a good?
-
Not SyncedOr might cause them to want more
of that good at a particular price? -
Not SyncedHow about changes in population?
-
Not SyncedMore people might increase
the quantity demanded -
Not Syncedat a particular price
-
Not Syncedbecause there are more
potential customers. -
Not SyncedFewer people in the world
could decrease -
Not Syncedthe quantity demanded.
-
Not SyncedHow about some other factors which might shift
demand curves? Well, there are prices of -
Not Syncedsubstitutes, prices of complements,
expectations, and changes in taste. These -
Not Syncedare all a little bit trickier but I'll go
through them all in a moment. I just -
Not Syncedwanted for now to give you a sense of some
of the other things which might also shift -
Not Syncedmarket demand. Of course everything I've
said about an increase in demand applies -
Not Syncedjust the same but in reverse for a
decrease in demand. A decrease in demand -
Not Syncedis a shift inwards of the curve toward the
origin. It again could be read in two -
Not Syncedways. It means that in any given price
there is less quantity demanded at that -
Not Syncedprice. Similarly, for any given quantity
there is a lower willingness to pay for -
Not Syncedthe same quantity.
A decrease in demand means a decrease in -
Not Syncedthe quantity demanded at every given price
or equivalently a decrease in the maximum -
Not Syncedwillingness to pay for each given
quantity. What might cause a decrease in -
Not Synceddemand? Again I'm going to belabor this
point a little bit but a decrease in -
Not Synceddemand is anything that decreases the
quantity demanded at a given price or that -
Not Synceddecreases the maximum willingness to pay
for a given quantity. If you keep in mind -
Not Syncedthat is what a decrease in demand means
then you'll always be able to come up with -
Not Syncedfactors which would decrease market
demand. Let's look in more detail at some -
Not Syncedof the demand shifters beginning with
income. The effect of changes in come on -
Not Synceddemand depends on the nature of the good
in question. For more goods, when your -
Not Syncedincome goes up you demand more of that
goo. Imagine that you're a poor student -
Not Syncedright now but soon you'll graduate and get
a high paying job. When you get that high -
Not Syncedpaying job, when your income goes up,
you're probably going to demand more -
Not Syncedautomobiles, more housing, and more fine
dining. These are all called normal goods -
Not Syncedbecause the demand for them goes up when
incomes go up. And of course the demand -
Not Syncedfor them goes down when incomes go down.
There are also goods however for which -
Not Syncedwhen your income goes up your demand for
them actually goes down. Again when I was -
Not Synceda poor student for instance, I actually
sometimes went to McDonald's to buy a -
Not Syncedcheeseburger because it was cheap. When my
income went up later I ate at McDonald's -
Not Syncedless often and ate at better restaurants
which of course cost more. I haven't -
Not Syncedactually eaten at McDonald's for many
years. An inferior good is one which when -
Not Syncedyour income goes up the demand for it goes
down and vice versa. For instance think -
Not Syncedabout soup. Soup is a cheap and easy meal.
So during a recession, the demand for soup -
Not Syncedmay well go up. During boom times, the
demand for soup may well go down. -
Not SyncedNow let's test your knowledge. I suggest
you get a pencil and also a piece of -
Not Syncedpaper. Put down two demand curves. Now
we're going to think about the demand for -
Not Syncedhamburger helper and we're going to think
about it in two different situations, -
Not Syncednamely during a boom and during a
recession. Here's our demand for hamburger -
Not Syncedhelper. What is going to happen to this
demand when the economy goes into a boom, -
Not Syncedwhen people's incomes go up? Now draw the
new demand curve? What's that new demand -
Not Syncedcurve going to look like? In a boom, the
demand for hamburger helper is going to -
Not Synceddecrease because hamburger helper is an
inferior good so we get a decrease in -
Not Synceddemand. What about in a recession? Of
course in a recession we get the opposite. -
Not SyncedIn a recession, when incomes are going
down the demand for hamburger helper is -
Not Syncedgoing up. Here's another demand shifter,
namely population. As the population of an -
Not Syncedeconomy changes, the number of potential
buyers of a particular good also changes. -
Not SyncedFor instance, what happens to the demand
for diapers in Russia as birth rates drop? -
Not SyncedWell, that demand is going to decrease. In
the United States, as you probably know -
Not Syncedthe baby boomers are getting older so
having many more elderly individuals in -
Not Syncedthe population. Which products will
increase in demand as the American -
Not Syncedpopulation gets older? Well, think about
that for a moment. Here are a few possible -
Not Syncedexamples. As the number of elderly in the
United States goes up we would expect an -
Not Syncedincrease in the demand for cancer drugs
for instance. Indeed as the population has -
Not Syncedgotten older, pharmaceutical firms have
invested more in research and development -
Not Syncedfor producing drugs for elder people. We
expect also as people get older, the -
Not Synceddemand for retirement communities goes up,
perhaps even the demand for golf. How -
Not Syncedwould we do this on the demand curve?
Well, use an old demand curve but as the -
Not Syncedpopulation gets older the demand for these
products, cancer drugs, retirement -
Not Syncedcommunities and golf equipment, well that
goes up so this curve shifts away from the -
Not Syncedorigin and up to the right.
Here's another demand shifter, the price -
Not Syncedof substitutes. Two goods are substitutes
if an increase in the price of one good -
Not Syncedleads to an increase in demand for the
other good as well. For example, suppose -
Not Syncedthat the price of Nike shoes goes up.
Well, that is going to increase the demand -
Not Syncedfor Reebok shoes and vice versa. Suppose
instead that the price of Nike shoes goes -
Not Synceddown, that is going to decrease the demand
for Reeboks as people switch from Reeboks -
Not Syncedto the now cheaper good, Nike. Another
example. What happens to the demand for -
Not SyncediTunes if songs on Spotify, a competitor,
become cheaper? If Spotify is cheaper, -
Not Syncedthat's going to decrease the demand for
iTunes. Another important demand shifter -
Not Syncedis the price of complements. Complements
are goods which tend to go together well. -
Not SyncedThink for instance if hotdogs and hotdog
buns. Technically, two goods are -
Not Syncedcomplements if an increase in the price of
one of those goods leads to a decrease in -
Not Syncedthe demand for the other. Suppose for
instance that the price of hotdogs goes -
Not Syncedup, that means fewer people are going to
buy hotdogs. That means that demand for -
Not Syncedhotdog buns is going to decrease as well
and vice versa of course. Again if the -
Not Syncedprice of hotdog buns goes down, people are
going to want to buy more buns. But then -
Not Syncedthey're also going to want to buy more of
the complement of hotdogs. So the demand -
Not Syncedfor hotdogs will go up when the price of
the complement hotdog buns goes down. -
Not SyncedHere's another example. What happens to
the demand for sport utility vehicles when -
Not Syncedgasoline gets more expensive? Cars in
gasoline or sport utility vehicles on -
Not Syncedgasoline, they're complements. When you
want one, you also want the other. So if -
Not Syncedgasoline gets more expensive, that is
going to decrease the demand for sport -
Not Syncedutility vehicles. Another important demand
shifter is expectations. -
Not SyncedIt can be expectations of events or of
prices. In particular, if people expect -
Not Syncedthe price of a good to be higher in the
future, that is going to tend to increase -
Not Synceddemand today. Consumers will adjust their
current spending in anticipation of what -
Not Syncedis going to happen to future prices in
order to obtain the lowest possible price -
Not Syncedby buying more today. For example, imagine
you hear there's going to be a hurricane. -
Not SyncedIf the hurricane hits you expect the price
of batteries is going to go way up or -
Not Syncedperhaps it's going to be very difficult to
even get any batteries at all. That's -
Not Syncedgoing to increase the demand for batteries
today. Something in the future, that is -
Not Syncedthis expectation of a future event can
change the demand today. Similarly, if -
Not Syncedpeople expect that the price of the Xbox
360 is going to drop right before -
Not SyncedChristmas, well then sales in November
will go down. Apple has to deal with this -
Not Syncedproblem all of the time. Each time people
expect a new iPhone model, they stop -
Not Syncedbuying the current version of the iPhone.
So Apple doesn't want anyone to know when -
Not Synceda new iPhone is going to be coming out
because otherwise in the mean time, the -
Not Syncedsales of the current product will drop.
Taste is an important demand shifter and -
Not Syncedtastes change all the time. Tastes differ
among consumers and they also differ -
Not Syncedovertime because of seasonal changes or
fashion or fads. For instance, what -
Not Syncedhappens to the demand for boots in
October? What happens to the demand for -
Not Syncedswimsuits in June? What happens to the
demand for sunscreen during the summer? -
Not SyncedWhat happens when everyone things that the
Atkins diet is going to cause them to lose -
Not Syncedweight? Let's take a closer look at that
one. The Atkins diet if you recall was a -
Not Synceddiet which said that carbohydrates make
you fat so the way to lose weight was to -
Not Syncedconsume more protein, more red meat in
particular. What do you think was the -
Not Syncedeffect of the Atkins diet on the demand
for red meat? -
Not SyncedIt increased that demand. What about the
effect of the diet on the demand for -
Not Syncedbread? It decreased the demand for bread.
By the way, Atkins later had a heart -
Not Syncedattack and after he had this heart attack,
the demand for the Atkins diet went down -
Not Syncedso these two factors went into reverse.
The final point for this lecture is a -
Not Syncedterminological one and this will become
more clear after we've covered more of -
Not Syncedsupply. I'll come back to that but for now
I just want to give you a heads up. -
Not SyncedUnfortunately, economists sometimes use
similar words for different concepts. In -
Not Syncedparticular, a change in the quantity
demanded is not the same as a change in -
Not Synceddemand. A change in the quantity demanded
is about a movement along a fixed demand -
Not Syncedcurve due to a change in price. For
instance, as you recall, we can say that -
Not Syncedat a price of $10, the quantity demanded
is 200. When the price changes and we move -
Not Syncedalong this curve, so then when the price
falls to $5 we see that the quantity -
Not Synceddemanded is 450 units. That's a change in
quantity demanded. It's a movement along -
Not Syncedthis fixed curve as we just saw. A change
in demand is a non-price induced change. -
Not SyncedIt's a shift of the entire demand curve. A
change in demand such as an increase in -
Not Synceddemand is again a shift in this curve. So
keep these two differences in mind. Change -
Not Syncedin quantity demanded is a movement along a
curve due to changes in price. A change in -
Not Synceddemand is a shift of the entire demand
curve due to changes in income or -
Not Syncedpopulation or taste or any of the other
factors other than price that we've talked -
Not Syncedabout. Anyway, those are the points for
now on demand curves. Thanks. -
Not Synced- If you want to test yourself,
click Practice Questions or if you're -
Not Syncedready to move on, just click Next Video.
- Title:
- The Demand Curve Shifts
- Description:
-
{'type': u'plain'}
- Video Language:
- English
- Team:
- Marginal Revolution University
- Project:
- Micro
- Duration:
- 14:00
Melanie Ty edited English subtitles for The Demand Curve Shifts | ||
Melanie Ty edited English subtitles for The Demand Curve Shifts | ||
Melanie Ty edited English subtitles for The Demand Curve Shifts | ||
Melanie Ty edited English subtitles for The Demand Curve Shifts | ||
Melanie Ty edited English subtitles for The Demand Curve Shifts | ||
Melanie Ty edited English subtitles for The Demand Curve Shifts | ||
Melanie Ty edited English subtitles for The Demand Curve Shifts | ||
Melanie Ty edited English subtitles for The Demand Curve Shifts |