Demand Part 3 5

Summary

In this insightful lecture, George Frost dives deep into various factors affecting demand beyond simply the price of goods. Key aspects such as quality, income, tastes and preferences, prices of substitute and complementary goods, number of consumers, and consumer expectations are discussed. Utilizing engaging anecdotes and relatable examples, he illustrates the intricacies of these factors and their impact on demand dynamics, ultimately aiding comprehension of economic principles in a practical context.

Highlights

• Quality of goods positively correlates with demand. Better quality, higher demand! 🎯
• Income level shifts demand differently based on whether goods are normal or inferior. Understanding this is crucial! 📊
• Changes in tastes and preferences impact demand directly. Popularity rises, demand rises! 📈
• Substitute & complementary goods impact demand in unique ways. Comprehending this helps in real-life decisions! 🤝
• Number of consumers influences market demand directly—a simple yet vital factor! 🧒👵
• Consumer expectations can sway market trends significantly. They foresee and act! 🔮
• The distinction between a change in demand and a change in quantity demanded is crucial in understanding market movement! ⚖️

Key Takeaways

• Quality matters! If quality goes up and nothing else changes, demand increases too 📈.
• Income impact: High income can lead to buying fancy instead of the basic stuff like Kraft Mac & Cheese 💸.
• Differentiate normal and inferior goods: As income rises, demand for normal goods increases, whereas it decreases for inferior goods 🔍.
• Trendy tastes: Changes in consumer preferences can cause demand to soar or plummet 🌟.
• Substitute goods rock! If Coke's price goes up, people lean towards Pepsi instead 🥤.
• Complementary goods: If film prices skyrocket, fewer players are sold - they go hand-in-hand 🎥.
• Consumer expectations dramatically influence demand; big sales coming up can delay current purchases 🕒.
• Distinguish between change in demand and change in quantity demanded—a critical economic principle! 🧠

Overview

George Frost delivers a compelling lecture discussing factors beyond price affecting demand. Initially, he emphasizes the positive relationship between quality and demand, urging students to recognize quality improvements will likely boost sales, independent of price changes. He provides humorous anecdotes to illustrate how income fluctuations typically alter consumption patterns for normal and inferior goods, enhancing the audience's grasp on economic variances.

The lecturer then artfully delves into changes in consumer tastes and how these translate to demand variations. Through illustrative examples, including catchy seasonal trends and everyday goods, he underlines the significance of substitutes and complementary goods on demand. These narratives help the audience relate theoretical concepts to practical scenarios, bridging the gap between classroom learning and real-world economic behavior.

Concluding his session, Frost addresses the essential differentiation between changes in demand and quantity demanded. By using accessible examples and clear guidelines, he clarifies how variations in non-price factors shift demand curves altogether, while price changes result in movements along these curves. This detailed breakdown of economic principles, peppered with engaging stories, ensures a comprehensive and enjoyable learning experience.

Chapters

• 00:00 - 01:30: Factors Affecting Demand The chapter begins with a discussion on factors other than price that affect demand, emphasizing the importance of holding certain variables constant, known as ceteris paribus conditions. The primary focus is on the quality of a product. The chapter highlights how an improvement in the quality of a good can lead to an increase in demand, even if the price remains the same, as consumers perceive greater value in higher quality products.
• 00:30 - 01:30: Quality and Demand The chapter 'Quality and Demand' discusses the relationship between quality and consumer demand, emphasizing a positive or direct relationship. It explains that as quality increases, demand tends to increase because people are willing to buy more of a higher-quality product. The key is to isolate one variable at a time to understand this relationship. Some students confuse this with price changes, mistakenly interpreting it as an inverse relationship, but the focus here is solely on quality and demand in isolation.
• 01:30 - 07:00: Income and Demand The chapter titled 'Income and Demand' explores how factors other than price, such as quality and income, affect consumer demand. It explains that there is a positive relationship between quality and demand; as quality increases, demand also increases, and vice versa. The chapter also discusses the impact of income on demand, noting that an increase in income typically leads consumers to buy more goods, such as automobiles.
• 05:00 - 07:00: Inferior Goods The chapter discusses the concept of inferior goods in economics, which are goods for which demand decreases as the income of individuals increases. This is contrary to the typical relationship where an increase in income leads to an increase in demand. The example provided evaluates a hypothetical scenario where an individual's weekly income increases dramatically, prompting a reevaluation of the goods they choose to consume, thereby illustrating the concept of inferior goods.
• 07:00 - 10:00: Tastes and Preferences This chapter explores the relationship between income levels and consumer preferences, specifically focusing on the demand for Kraft macaroni and cheese. It challenges the assumption that higher income results in a higher demand for the same products by using the example of a millionaire. The chapter suggests that as income increases, people are likely to choose different products, implying a shift in preferences away from goods like Kraft macaroni and cheese, despite brand loyalty.
• 10:00 - 15:00: Prices of Other Goods This chapter humorously touches on the preferences of a hypothetical millionaire when it comes to choosing macaroni and cheese. It contrasts the choice of purchasing popular, budget-friendly brands like Kraft and Velveeta with the option of dining out or having a chef prepare gourmet pasta dishes such as those with bechamel sauce. The narrative suggests that with wealth, one's choices could shift from common, everyday options to more luxurious, sophisticated meals.
• 15:00 - 18:30: Number of Consumers The chapter titled 'Number of Consumers' includes a humorous personal anecdote from the narrator about going to Outback Steakhouse. The narrator recalls indulging in macaroni and cheese from the kids' menu, ostensibly meant for the narrator's children, but enjoyed by the narrator instead. To justify this to the kids, the narrator would claim the dish was 'too spicy', even though it was actually very smooth and not spicy at all. This story highlights themes of nostalgia, indulgence, and perhaps parental mischief.
• 18:30 - 23:00: Consumer Expectations The chapter humorously explores consumer expectations through a personal anecdote of the speaker's family meals. The speaker describes how they convinced their children that certain foods were spicy to keep them from eating it. A specific incident is recounted when the speaker enjoyed a spicy Dorito chip and tricked their two-year-old daughter into believing it was too spicy for her. This chapter highlights how perceptions can be influenced by past experiences and the playful dynamics within family settings.
• 23:00 - 27:00: Graphical Representation of Changes in Demand The chapter humorously illustrates a "teachable moment" through a personal anecdote involving a parent and a child. The child insists on eating a spicy chip despite being warned about its spiciness. Ultimately, the child's facial reaction and visible panic upon tasting the chip serve as a comical example of experiencing the unexpected intensity of new sensations. This small narrative serves to graphically represent the unforeseen changes or crises in demand, akin to a market experiencing sudden shifts.
• 27:00 - 32:30: Change in Quantity Demanded vs. Change in Demand The chapter discusses the difference between a change in quantity demanded and a change in demand. The speaker humorously shares an anecdote about ordering spicy macaroni and cheese at a restaurant, which leads into an explanation of how income changes affect purchasing behavior. Generally, as income increases, the quantity of goods demanded increases, but there are certain goods for which demand decreases as income increases, known as inferior goods.
• 32:30 - 34:00: Graphical Illustration: Change in Demand and Quantity Demanded This chapter explains the concept of inferior goods through examples such as Kraft macaroni and cheese and public transportation, like buses. It highlights how the demand for these goods decreases as consumer income increases, illustrating a characteristic pattern where individuals opt for different options when they have more financial resources.

Demand Part 3 5 Transcription

• 00:00 - 00:30 okay what i want to talk about now are the factors other than the goods price which affect demand you know those ceteris paribus factors those things we were holding constant and the first one that i want to talk about is quality right because we mentioned that earlier we're talking about the law of demand so if the quality of a product
• 00:30 - 01:00 were to go up what would people do they'd buy more right and if the quality would grow debt would go down they'd buy less this means that there is a positive or direct relationality and demand now sometimes students get confused about this they say wait a second wait a second if quality goes up then the price is going to go up and if the price goes up then people buy less so they say there's an inverse relationship between quality and demand but remember in economics we typically change one factor at a time so what we're saying is if
• 01:00 - 01:30 quality goes up and nothing else changes then people buy more because we're looking at factors other than price right and when quality goes down people buy less so it is a positive relationship okay second factor which affects demand is related to income right um so think about it when your income goes up what do you do you normally buy more your income goes up you buy more automobiles people's income goes up they buy um more uh
• 01:30 - 02:00 meals at restaurants when people's income goes down luxury vacations right so it looks like there is a direct relationship between income and demand right income goes up demand goes up income goes down demand goes down a direct relationship is that always the case try this example out for such imagine you make fifty dollars a week right and then um imagine your income goes to a million dollars a year i had a kid who said hold on a second let me calculate whether that's an increase hopefully you see it's an increase right
• 02:00 - 02:30 you make 50 a week now you make a million dollars a year what's going to happen your demand for kraft macaroni and cheese it's going to go it's going to go up right right are you sure it's not going to go up you're making million dollars a year it's not going to be a positive relationship you're going to buy less i know a lot of brand loyalty towards craft macaroni and cheese but if you're a millionaire you know you think we go to trump's house you think trump opens up his pantry and says look at my pantry look what i got i got uh i got the best i got the best crap macaroni
• 02:30 - 03:00 and cheese i got spirals i got shells i even got spongebob shapes over here in the corner no if you love macaroni and cheese and you're a millionaire um i one kid who said i'm a millionaire i'm not buying crap macaroni and cheese now i'm buying velveeta come on if you're a millionaire have a chef make it go out to a restaurant have yourself some uh pasta with bechamel sauce that stuff will knock you on your butt that's pretty good um have something fancy you're not gonna have uh kraft macaroni and cheese at the
• 03:00 - 03:30 very least at the very least go to outback for the macaroon cheese i know something like what's the macro listen i don't even serve it anymore i don't think they just have regular macaroni and cheese it was this great macaroni and cheese i like steak so i would go and i'd take my kids to um outback and i would get them the macaroni and cheese off the kids meal and i give myself a steak and then when it came i tell my kids it's too spicy and i know you're thinking that's terrible because i take the macaroni and cheese for myself by the way it's not spicy it's the smoothest thing you ever tasted
• 03:30 - 04:00 i'm not so mean i gave my kids the bread and listen for those who think that's me they contributed nothing to the meal they're lucky they were getting fed at all right um so any event i would have steak and macaroni and cheese combinations now you might be saying why do your kids believe you that it's spicy when they get it that you're lying to them well there was an incident when my daughter was um when my daughter was two years old my daughter was two years old i was eating a doritos blazing buffalo and ranch chip and i took up i took a bite of the of the chip and i was really enjoying it and she was two and she said i want chip and i said no no you don't
• 04:00 - 04:30 want one of these chips it's too spicy she said i don't care i want a chip i said no no this chip is too spicy i don't care i want chip so i thought this was a teachable moment so i gave my daughter a doritos blazin buffalo and ranch dorito chip you never saw something so funny your entire life you ever see somebody with panic sets in her eyes you can just see that look of panic well that's what happened to her because nothing in her young life had ever happened to her like this before and so panic began to set in her eyes and her eyes began to water they even began to tear in the corner and her face
• 04:30 - 05:00 turned bright red and she began to scream the most blood-curdling screams you've ever heard my cheeks they're melting off my face they are melting off my face and i laughed so we're at outback and i say hey macaroni and cheese is too spicy they say too spicy i say remember that chip they go and that's the end of that and i clean up on the macaroni and cheese so what's my point here when income goes up yeah you buy more of goods normally but there are some goods where you buy actually buy less of them and we call those
• 05:00 - 05:30 inferior goods if you don't believe me about craft macaroni and cheese think about the bus think about the bus when income goes when your income goes from 50 a week to a million dollars a year does your demand for the bus go up you get very excited to take greyhound or the city bus no you use other forms of of transportation when your income is a million dollars a year you're going gonna take the bus less so there are these goods called inferior goods like kraft macaroni and cheese uh like the demand for the bus how about those ramen
• 05:30 - 06:00 noodles they sell to store you know in the square in the square package you know the ones i'm talking about you open it up it feels like cardboard you're like this can't possibly be food it's cardboard but you know seconds later it's like a magic trick you have soup in front of you um these are products which we call inferior goods so let's review on income when income goes up do people buy more of a product well they do for something called a normal good when income goes up the demand for normal goods goes up and when income goes down the demand for normal goods goes down that's most goods
• 06:00 - 06:30 like i talked about with automobiles luxury vacations restaurant meals and so forth but there are some products which we call inferior when your income goes up you actually buy less of them like kraft macaroni and cheese uh the bus ramen noodles your income goes up you buy less or if your income goes down you buy more so if it's if you're getting you get a question on what happens to demand when income goes up the first question you should ask is is it a normal good or an inferior good if it's a normal good it's
• 06:30 - 07:00 a positive relationship they both go up and down together if there's an inferior good it's an inverse relationship when one goes up the other goes down and one goes down the other goes up all right so that's the second factor which affects demand the third factor which affects demand is a change in tastes and preferences right people can change the popularity of a product can change people can just change their taste for a product the example i like to give for change in taste and preferences you might not like but the demand for jets t-shirts sweatshirts hats and so forth is very high in late
• 07:00 - 07:30 august september maybe even into october on some years but after october the taste for jets t-shirts sweatshirts and hats goes down because their season is over right and something like the football season continues in jack to january not for the jets it doesn't for the jets it really ends about october unless maybe a good year you get into november you don't like this example it's too painful for you jet fans some of you aren't sports fans i'll give you another example what happens to the demand for snow blowers as summer approaches right as summer approaches
• 07:30 - 08:00 people's taste for snow blowers goes down and then their demand goes down as winter approaches their case for snowblowers goes up so demand goes up so what's the relationship between taste and demand it's direct it's positive right when taste goes up demand goes up when taste goes down demand goes down so that's a factor change in tastes and preferences one kid by the way said i was wrong about the snowblower example because he said hey look when summer approaches the price goes down when the price goes down people buy more again what's the problem problem is
• 08:00 - 08:30 ceteris paribus you want to focus only on the one factor that's changing if the price stays the same and the taste for the product goes up demand will go up if the price stays the same the taste for product goes down demand will go down so it is a direct relationship okay next factor is prices of other goods that's the fourth factor prices of other goods so let me give you some examples for prices of other goods price of coca-cola goes up what happens to demand for pepsi it goes
• 08:30 - 09:00 up right can you see it when the price of coke goes up people say i don't want the coke because it's more expensive so they turn to another product like pepsi that is what kind of relationship it's a direct relationship it's a positive relationship well let's try uh another example if the price of chicken goes down what do people do they buy more chicken so if they're buying more chicken what happens to demand for hamburgers it goes down right when the price of chicken goes down the demand for hamburgers goes down notice again positive relationship
• 09:00 - 09:30 so you might think there's a direct or positive relationship between all prices of other goods and demand for another good but is that always the case try this example if the price of blu-ray discs go up what happens to the demand for blu-ray players go up positive relationship no it doesn't it goes down right because if blu-ray discs go up price of blu-ray disc go up people say what am i buying blu-ray discs for and then people are not going to want to have blu-ray players they'll stream
• 09:30 - 10:00 their movies or something like that so there are some goods when the price goes up the demand for the other product actually goes down all right so how do we distinguish between the two kinds of goods the first two examples i gave you the pepsi and the coke the hamburger and the chicken those products were known as substitute goods and so if the price of a substitute good goes up the demand for its substitute goes up and if the price of a substitute good goes down the demand for the substitute goes down as it did in the hamburger and chicken and
• 10:00 - 10:30 pepsi and coke examples it's a positive relationship in the case of substitute goods and price of substitute goods and demand but there are some products they're called complementary goods these are goods that go together you don't use them instead of one another you use them together so in the case of price of a complimentary good you might say the price of blu-ray discs go up the demand for blu-ray players goes down it's an inverse relationship what are other examples of complementary goods uh milk and no not cereal cookies all right fine cereal for the you health
• 10:30 - 11:00 nuts out there i was going to say milk and cookies milk and cereal um guns and don't say roses students say roses it's very funny guns and bullets uh would be examples of complementary goods i do have one kid when i say what's the relationship guns and kid says uh gunpowder i don't know what century he's growing up in but um you know it sounded like he was using muskets in the 17th century guns and bullets would be in our world
• 11:00 - 11:30 complementary goods and 400 years ago guns and gunpowder maybe less than that um peanut butter and jelly would be another example peter and jelly is a tricky one because some people view them as substitutes and some people view them as compliments right some people say i need peanut butter or i'd eat jelly but i wouldn't eat them together and some people say that's the only way to have them i once gave that question when i was teaching at the university of connecticut the question was suppose the price of jelly skyrockets what happens
• 11:30 - 12:00 to the demand for peanut butter and i thought they might have trouble with the question because because do they think they're substituting they think their compliments i didn't care as long as they wrote their reasoning right so if the price of jelly skyrockets what happens the demand for peanut butter if you think they're substitutes if the price of jelly skyrockets then you would go to the store you wouldn't buy as much jelly because it's expensive you'd turn around and you would buy um you would buy peanut butter so if the price of jelly skyrockets the demand for peanut butter would go up notice
• 12:00 - 12:30 positive or low substitutes but if you think they're compliments when the price of jelly skyrockets you go to the store you're like we're not buying jelly and if we're not buying jelly we're not going to buy peanut butter either we'll have something like chicken salad so the price of jelly skyrockets demand for peanut butter goes down but again as long as you use your reasoning skills you're okay it didn't matter to me whether you thought there were substitutes or compliments just if you could reason i did have a student though uh uconn early 90s came up to me and says professor frost i can't answer this question
• 12:30 - 13:00 and i said you can't ask the question what's the problem he said read the question so i read it again suppose the price of jelly skyrockets what happens to the demand for peanut butter i said what's the problem he said i don't know what a jelly skyrocket is yeah it's a true story i don't know what to tell you other than sometimes our problems are greater than than economics if you had told me at the beginning of my teaching career that i would have to send a student back to their seat and make the following announcement to a group of prospective college graduates in case anyone's having problems with question number seven
• 13:00 - 13:30 there is no such thing as a jelly skyrocket if you had told me that the words there is no such thing as a jelly skyrocket would utter from my lips into a college classroom that i would need to tell a perspective class of prospective college graduates that fact i never would have believed you but that happened it's what i like to call a yukon special um these stories by the way are absolutely true they're not things that i made up because i thought they were they'd be funny for them to happen all right so now we have that's the fourth factor prices of other goods
• 13:30 - 14:00 here's a fifth factor it's an easy one number of consumers the more consumers in the marketplace more consumers more demand in the market less consumers less demand positive relationship between the number of consumers and the demand in the marketplace pretty easy to see the only problem students sometimes have with this factor is they confuse the number of people in an area with the number of consumers consumers and total population are different let me just give you a simple example to illustrate the point
• 14:00 - 14:30 imagine you live in an area where the population is shrinking it's growing smaller but it's growing older taller but being older at the same time you expect the demand for hearing aids and viagra to go up the demand for heroin and condoms to go down um you know basic understanding of demographics i did another class who said uh hold on a second um uh uh you know i think he made a mistake because what he argued he argued about complementary goods right he said i
• 14:30 - 15:00 think viagra and condoms are complementary goods um that may be i don't know what uh what the senior set is doing with regard to uh safe sex um apparently not not much because like apparently it's just a tremendous problem with uh sexually transmitted diseases um in any event i actually had a student who confirmed this analysis so that he said oh my god he said he said yes he said absolutely he said um if you go to florida these 80 year olds
• 15:00 - 15:30 really i don't know what the hell he's talking about why is he going to florida to visit assisting nursing homes for uh sexual escapades with the with uh with the people there most uh most college students are heading to key west this guy's heading to boca raton within any event i also had another kid who did some who said something strange um i said i they didn't i was trying to hint to the fact that viagra economists might be complimentary goods and i said well the kid said that there might be those two last few products i talked about there might be a complimentary relationship okay he goes oh yeah i got
• 15:30 - 16:00 this he said viagra and heroin they're complimentary goods well now it's a party uh again i don't know what parties this guy's going to where he's using viagra and heroin but in any event just be careful on the number of consumers it's the number of people it's not uh it's not the number of people it's the number of consumers in a particular in a particular marketplace all right sixth factor which affects demand that is consumer uh expectations okay consumer expectations um
• 16:00 - 16:30 when it comes to consumer expectations um this could be there's not gonna be a positive or negative standard relationship because consumers can expect so many different things are they expecting what happens to prices in the future are they is this an expectation about different weather patterns political events it could be a lot of different things so it really depends on the question depends on the situation but just to give you a few examples of how expectations about the future can matter suppose you think that large screen tvs
• 16:30 - 17:00 high definition tvs are going on sale next week what's going to happen the demand for high definition uh tvs this week it's going to go down right because you're going to put off your purchases until next week when it's on sale you think there's going to be a hurricane next week what happens to demand for bottled water this week demand for bottled water increases as you get ready for the hurricane next week a similar question you think there's going to be a terrorist attack what happens to the demand for duct tape you don't know yeah
• 17:00 - 17:30 it goes up if you go to department of homeland security it tells you you should have duct tape in the case of a terrorist attack you don't understand why it's it's it's actually pretty simple it's for your windows like in a hurricane you seal your windows in and then that if there's an explosion or there's some sort of leak or something like that you're more protected that's why the demand for duct tape goes up i remember i asked the student this question of students this question once and i said hey what happens to the demand for duct tape when there's going to be a terrorist attack he looks at me and says well that's kind of obvious isn't it and i said okay maybe it's kind
• 17:30 - 18:00 of obvious but can you just explain to the class he goes really i said yeah he says well the demand for duct tape goes up and when you think there's going to be a terrorist attack because what else are you going to tie up the terrorists with what is he talking about nobody's tying up terrorists it's for your windows he's clearly seen one too many movies that's what i like to call a a nasa special all right so i've now gone over several factors that we're holding constant and how they affect demand you have quality income tastes and preferences prices of
• 18:00 - 18:30 other goods number of consumers and consumer expectations and be careful about the income one and price of other goods because how income affects demand will depend on whether you're talking about the demand for a if it's a normal good or inferior good and prices of other goods will be affected by whether it's a price of a substitute good or the price of a complementary good so make sure you get those factors down what i want to do now is i want to show you um how a change in one of these factors
• 18:30 - 19:00 that we've been holding constant will affect the graph so that's what we'll turn to next okay now what we're going to do here is we're going to show you what happens uh graphically when one of the factors that we just talked about one of the factors other than the goods price change what happens on the graph
• 19:00 - 19:30 so what i've done is i've drawn in the table that from earlier and i have drawn in the graph from earlier if you notice if you look at the graph there's a downward arrow we shouldn't think of it like that though there's an arrow moving to the right right from the price drops from 10 to eight you can see that arrow moves from one to five showing an increase in the amount demanded so what we're going to do now is we'll look at this table that we have over here right with price of 10 quantity made of one price of a coin domain of five etc now in that table what was what was happening to all
• 19:30 - 20:00 those um to all the factors we just talked about quality income tastes and preferences prices of other goods number of consumers consumer expectations what was happening to those factors what was happening to those factors where they were being held constant right ceteris paribus that's how we were able to draw the demand curve right with according to law demand we have holding everything else constant so let's relax at assumption let's just take the easiest one let's say let's say people's
• 20:00 - 20:30 taste for a product increases let's say for some reason people develop a higher preference for the product something happens where now this product is more popular than it was before etc um so what's going to happen here is is we're going to get new numbers right so if the taste changes we're going to get a whole new demand is going to get a whole new set of points so if you take a look at this at a price of 10 right people were buying one before right
• 20:30 - 21:00 but now we're gonna assume they're gonna buy more because they have a higher taste for a product so let's make it two and at eight dollars they used to buy five right but now that there's a more of a taste for the product let's say they're gonna buy uh six as a matter of fact let's do that all the way through at each and every price let's assume that the amount that they want to buy now has increased by by one so they used at six dollars they used to buy nine now they buy ten at four dollars they used to buy 13
• 21:00 - 21:30 now they buy a 14 at two dollars they used to buy 17 now they buy 18. well if you look at that table you can see at every price the amount that people are buying is more at 10 they used to buy a one but now they buy two at eight dollars they used to buy five now they buy six at six dollars they used to buy nine now they buy ten etc so now we gotta look at our graph how is that going to change the graph
• 21:30 - 22:00 well if you notice we had this point over here right at 10 and 1. well now that point is not 10 and 1 that point is now 10 and 2. all right and eight dollars they used to buy five but now they buy six so eight they just now they buy six so if you connect all those points along the demand curve you will get a whole new demand curve
• 22:00 - 22:30 now notice that curve has shifted to the right at each and every point the demand curve is further to the right than it was before so that gives us a basic rule right when the demand goes up when the demand increases as it has here because there's been a change in people's tastes the demand curve will shift to the right i should have labeled this original demand curve is d okay the demand curve will shift from d over to d1 it'll shift to the right now
• 22:30 - 23:00 what if pace went down well if taste went down we'd shift back from d1 back to d we'd shift to the left so this is the basic idea that if one of those factors changes um we will shift our demand curve to the right if it's an increase and if one of those factors changes we will shift the demand curve to the to the left um and that's basically how the one of those factors can change the the curve graphically what i just like to do now is just for a second is i would like to um show you a new
• 23:00 - 23:30 a new graph um just as a little cleaner okay so just to review that rule so we have price and we have quantity we have demand i don't have to worry about numbers here so if the demand curve were to increase for some reason if you know quality were to go up income were to go up and it's a normal good um or if uh income were to go down and it's an inferior good or there's an increase in people's taste for a product or the price of a substitute product rises
• 23:30 - 24:00 or the price of a complement decreases or the number of consumers increase or there's some sort of change in the future which causes people to want to purchase more that demand curve will shift all the way to the right right on the other hand if something happens okay here's her to make her on the other hand
• 24:00 - 24:30 something happens which causes demand to decrease so for example if there is a a drop in uh in people's income and it's a normal good or if it's a uh if it's a increase in people's income and it's an inferior good or it's a drop in people's taste for a product or the price of a substitute falls or the price of a compliment rises or the number of consumers fall uh or people's expectations about the future um also uh
• 24:30 - 25:00 change um or maybe quality falls if these sorts of things happen then that demand curve will shift to the left all right so what we're trying to review here is uh what sorts of things change uh when one of those factors changes how does it change the graph and so when there's an increase in the amount that people buy based on one of those factors other than the goods price then you increa you shift the demand curve to the right because it's an increase if one of those factors
• 25:00 - 25:30 other than price causes demand to fall you shift that demand curve to the left because it's a it's a decrease now what we have to talk about next is how a this a terminology issue with economics and for economics there's something called a change in quantity demanded and there's something called a change in demand now we've been kind of talking about a little bit i just haven't referenced it but it's kind of a very important rule and that's what we have to talk about next
• 25:30 - 26:00 okay now we're going to talk about that important rule that i talked to you about earlier the difference between a change in quantum and a change in quant and demand so there's two different terminology in economics one is a change in quantum demand and one is a change in demand and as i said they both sound like they're saying the same thing but they're very different so let's take a look at uh the rule the rule rule number one says if the price of the good changes now i want you to take a look i have bolded i have underlined and i have all capped the word the um and that
• 26:00 - 26:30 means it's pretty important right so if the price of the good changes then there'll be a change in the quantity demanded that's one to use the phrase quantity demanded if there was a change in the price of the good the second rule says if a factor other than the price of again bolded underlined all capped if a factor other than the price of the good changes then there'll be a change in demand for that good so if one of the factors changes you say it's a change in demand if the price of the good changes you say it's
• 26:30 - 27:00 change in quantity demanded so i'd like to do now is talk about look at the easy problem here so here's the first easy problem if the price of hamburgers decreases should i say there's an increase in the quantity demanded of hamburgers or should i say there's an increase in the demand for hamburgers well you should see pretty clearly that it's rule one that applies right because it's a change in the price of the good so therefore it is a change in quantity demanded
• 27:00 - 27:30 on the other hand um let me give you a second question now if i say there's a change in the quality of hamburgers should i say there's an increase in the quantity demanded of hamburgers or should i say there's an increase in the demand for hamburgers you should clearly see that i should be saying a change in demand for hamburgers because in this case it's a factor other than the price of the good okay i want to go to a sample multiple choice question to help you understand the
• 27:30 - 28:00 difference between the two rules now hopefully these first two examples that i just did are pretty straightforward and you understood those and you got those correct if you haven't got those correct you might want to review that because this is going to get harder okay so i've left the two rules on the board here or on the on the paper here and now we're gonna take a look at the sample multiple choice question here's what the sample multiple choice question says says if the price of hot dog rolls increase then there will be uh and now there are four choices increase in the quantity made of hot dogs be a decrease in the quantity made of hot dogs see an increase in demand for hot dogs d a
• 28:00 - 28:30 decrease in demand for hot dogs okay so now i want you to think about your answer and select it if you need to pause the video while you think about it then do that and now i'm going to talk about what the answer what the answer is well first i want to eliminate two of the pairs i want to eliminate either a and c or b and d right a and c both suggest that the price of hot dog rolls increase people will buy more hot dogs b and d suggest that the price of hot dog rolls increase people will buy less hot dogs so we should be able to eliminate one of
• 28:30 - 29:00 those pairs now hopefully what you've eliminated is a and c a and c are not correct because a and c both suggest that the price of hot dog rolls increase then people will buy more hot dogs and that's not true right because when the price of hot dog rolls increase people are not going to want to buy hot dog rolls and if they're not buying hot dog rolls they're unlikely to get hot dogs they'll probably switch to some other food for dinner for lunch hamburgers chicken etc so you can get rid of a and c it's not an increase in the amount that's bought it's a decrease in the
• 29:00 - 29:30 amount that's bought because hot dog rolls and hot dogs are what economists call at this point you should be you know shouting out complimentary goods maybe not shouting out that probably looks a little weird but at least be saying uh complementary goods all right so that's their relationship they're complementary goods so the question becomes is the answer b and d or b or d now a lot of people um say oh the answer is b and i'll ask them why do you think the answer is b and they'll say well you told us up here that if the price changes i should say
• 29:30 - 30:00 quantity demanded but think about how much a more simple rule that is i didn't write all the i didn't write just if the price changes then use quantity minute i have all this stuff so it's maybe the rule is more complicated than you're making and it is it's not just if the price changes it's the price of remember i told you bold underline all caps if the price of the good changes has the price of the good changed well all these choices deal with hot dogs in your question did the price of hot
• 30:00 - 30:30 dogs change and the answer is no it was the price of the hot dog rolls which means it's actually rule two that applies it's a factor other than the price of the good right we just said it's the price of a complementary good so it's one of the ceteris paribus factors it's one of the factors that we are holding constant so you do not want to use the phrase quantity demanded you want to use the phrase demand and so the actual answer is a decrease in the demand for hot dogs
• 30:30 - 31:00 that's the answer to the question because it was a factor other than the price i know some of you are saying no no it's price that changed yeah but look what price it's the price of the rolls that changed that's a complimentary good that's a ceteris paribus factor so he so we'll go over the rules a second but you really should see again we'll go over the rule but you should see that the answer is a decrease in demand for hot dogs it was a price a factor other than the price of the good it did come
• 31:00 - 31:30 from our list it was a change in the price of a complementary good that means you use the phrase demand all right now we're going to talk about next about uh the rule and more specifically and then we're also going to talk about what it means graphically okay so what i've done here is i've put the graph that we were just a graph of the problem we were just discussing involving hot dogs so just to
• 31:30 - 32:00 review that if you remember we were talking about the hot dog market we had this multiple choice questions that if the price of hot dog rolls increases what will happen in the hot dog market if you remember we said that there will be a decrease in the demand for hot dogs because it was the price of a factor other than it was a factor other than the price of the good it was a change in um the price of a complementary good so therefore we said the answer is demand now how do we show that in the graph well if it's a change in a factor other
• 32:00 - 32:30 than the price of the good which means there's a change in demand that tells you to shift the curve okay so it means that people are going to be buying less hot dogs they're not buying less hot dogs because the price changed of hot dogs they're buying less hot dogs because the price of hot dog rolls change the price of hot dog rolls increase which means they're going to buy less and you're going to shift the demand curve to the left so this shift this leftward shift demand curve that shows a change in demand
• 32:30 - 33:00 but if it had been a different question if it had been a question which said to you if the price of hot dogs increases then the answer that question would have been choice b and you would have said it's a decrease in the quantity demanded of hot dogs in which case you would have been saying okay the price of hot dogs are rising so therefore people are going to buy less hot dogs and you would have moved along your curve to the left all right now
• 33:00 - 33:30 notice that curve's not going up it's going to the left so you go along your curve to the left and this would show a change in quantity demanded okay because you're moving along the curve so it's a change in demand it's actually a decrease in this case because you were going to the left it's a decrease in this case because you're going to left but the key thing i'm trying to talk about here is not the direction hopefully you have that down by now you know decreases to the left and increases
• 33:30 - 34:00 to the right but it's about when you use the term what do you do with your graph so if you're saying there's a change in demand you will um shift the curve and if it's a change in quantity demanded you will move along the curve so you should add that to the rule that i gave you earlier if it's a change in uh so rule one should say move along the curve and rule two should say uh shift the curve by the way don't make up terms there's no such thing as shifting along the curve that's just going to mix you up you do one of two things you move along the curve if it's
• 34:00 - 34:30 a change in quiet demanded then you move along it or you shift the curve um if it's a change in demand okay all right so that concludes our discussion of um how you can show a change in quantum demand graphically and how you can show a change in demand gravity um the addition to our rule um uh uh within our rule so if you notice now rule one says uh it says the rule and then it says what you should do graphically which is move along the curve and rule two basically says what we're supposed to do
• 34:30 - 35:00 here's the here's the rule and now what you do graphically is you shift the curve changing quite demanded move along the curve change in demand you shift the curve