- [Instructor] Now in these bottom four,
let's think about the situation
where both of the curves might move,
so let's first imagine a scenario
where supply goes up
and demand goes down,
so once again, maybe a major producer
is entering into the market,
supply goes up and that study comes out
that ice cream is less healthy than suspected,
so demand goes down.
What is going to happen
to your equilibrium price and quantity?
Pause this video and try to figure it out.
Well, if the supply goes up,
the supply curve is going to shift
to the right just like we saw up here,
so our supply curve is going to shift like this,
so this would be S2, it's going to shift to the right
and down and so, our demand,
if it goes down for a given price,
people would demand less quantity,
so we're shifting to the left and down,
this is D2 right over here,
shifted to the left and down
and so, what is our new equilibrium point,
at least how we've drawn it right over here?
So, our new equilibrium point looks like this.
It's clear that our price went down,
so price has gone down
but what about quantity?
Well, this is actually an interesting thing.
Depending on how I draw it,
if we don't know the exact numbers here,
I could have drawn it so that the quantity
might have stayed the same,
I could have drawn it here,
it looks like the quantity went up a little bit
but if I drew my new demand curve like this,
my quantity would have gone down a little bit,
so actually in this situation,
price for sure is going to go down,
you have more competition amongst the suppliers
and there's less demand
but it's unclear what happens to quantity,
so quantity in this situation
is indeterminate we could say.
Now let's go the other way around.
Let's assume that supply goes down,
supply goes down and demand goes up.
So, what would happen in that case?
Pause the video and try to figure it out.
Or if supply goes down,
our supply curve is going to shift to the left and up.
At a given price we will supply less
and so, this would be S2 right over here.
We're gonna shift to the left and up
and our demand has gone up.
At a given price we would demand more
or at a given quantity we would be willing to pay more,
so we would shift our demand curve now, D2,
we would shift to the right and up
and our new equilibrium point,
the way that I've drawn it
is right over here
and so, here we have P2
and then here, at least the way I've drawn it,
I have Q2, my graph is getting a little bit messy
but what happened?
Well, the price unambiguously goes up.
It makes sense.
Our supply has gone down
and more people wanna buy the ice cream
but what about quantity?
Well, once again, depending on how you draw it,
I could make the quantity go up a little bit,
I could make it stay neutral,
I could make it go down,
so you would actually have to know the specifics
of those curves exactly their shapes
in order to figure out what happens to quantity.
You can't make a judgment
just based on these general upward
and downward sloping curves.
Now let's go and make both of them increase.
So, let's say that both supply goes up
and demand goes up.
So, supply going up,
the curve would shift to the right
and down, so that's supply two
and then demand going up,
demand at a given quantity,
people would be willing to pay a higher price
or at a given price,
people would be willing to take on
a higher quantity,
so demand has gone over here,
so we've shifted to the right and up
and our new equilibrium point looks like right over there,
so it's clear, it's unambiguous
that our new equilibrium quantity Q2 has gone up.
Q, quantity has gone up
but price now is ambiguous.
Depending on how I drew these curves,
I could make it look like the price is the same,
I could make it look like it's gone up
or I could make it look like it's gone down
and so, the price here is ambiguous.
And last but not least,
let's imagine a situation
where they both go down,
where supply goes down
and demand goes down.
So, supply going down will shift to the left and up.
Once again, one way to think about it
at a given price you would be willing to supply less,
so that's S2 right over here
and demand, I'll do demand in a different color,
it's nice to do it in a different color,
if my demand has gone down,
if my demand goes down,
at a given price,
people will demand less,
so my demand has gone down,
something like that or at a given quantity
people would be willing to pay less
and so, my equilibrium point right over here,
my equilibrium quantity Q2
has clearly gone down.
That makes sense, they're supplying less
and people want it less,
so quantity clearly went down,
quantity goes down
but price once again is ambiguous
depending on how I draw it.
I could make it look like it stays the same,
I could make it go up, I can make it go down,
it would depend on the particulars
of those curves to actually determine
what would happen to price in that situation
and of course, let's not forget to label our curves here.
That was D2 in the previous example
and this is D2 in that last example.
The only reason why I'm making sure we do that
is one, it makes it clearer
and also, when you need to do this
on something like an AP exam,
it's really important that you label all of the things,
the title of your chart, your equilibrium prices
and quantities, you label the curves,
you say the vertical axis is P,
the horizontal axis is Q
and that when you have a shift that you show that shift
and actually here I forgot to draw that shift as well,
so that you have arrows that show your shift in supply
or demand, so all of these components,
make sure that you're able to draw it
when you see it on say an AP exam.