- [Instructor] What we're going to do
in this video is think about all of the different ways
that a supply curve or a demand curve can shift
and that's why we actually have eight versions
of the exact same diagram.
Each of them is showing
where we are right now, let's say in a given region
in the ice cream market.
It's important to title your graphs,
especially if you were taking some type
of a standardized exam like an AP exam
and in the vertical axis
we have P representing price,
and then the horizontal axis, Q representing quantity,
we have our upwards sloping supply curve.
I'm calling this S1 just as kind of our starting point
and then we have our downwards sloping demand curve, D1
and where they intersect,
that gives us our equilibrium price, P1
and our equilibrium quantity, Q1
and once again, if you were taking
some type of a standardized test,
it's important that you label all of these things
including P1 and Q1
and show this dotted line
where it intersects the horizontal axis,
this is Q1 and where it intersects the vertical axis,
it is P1.
Now with that out of the way,
let's think about what happens to the equilibrium price
and the equilibrium quantity
given different shifts in the supply
or the demand curve or both of them.
So, in this first scenario,
let's imagine that all of a sudden
a major ice cream producer enters
into the market,
so here we're going to this first one,
we're gonna think about a situation
where the supply goes up.
So, one way to think about it
is at any given price,
people are willing to supply more quantity,
so here we would have our supply curve shift to the right,
I'll call this S2 right over here,
it's shifting to the right and down
and so, given this,
what happens to our equilibrium price
and our equilibrium quantity?
Well, you see it right over here.
If I draw a dotted line,
we see our equilibrium price P2 is lower
and our equilibrium quantity Q2 is higher,
once again, assuming that we have
a downwards sloping demand curve like this
which is what you would typically see
and so, in this case,
let me just write it here,
we have our quantity,
actually, let me write it this way,
we have our price goes down
and our quantity goes up.
All right, now let's do this example
and let's imagine the other way,
let's imagine in this scenario
our supply goes down.
What is going to happen to this graph
and in particular, what's going to happen
to our equilibrium price and our equilibrium quantity?
Well, in this situation for a given price
people are willing to supply less,
that's how I would like to think about it,
so we would have a shift to the left
and up and so, we could call this supply curve two
right over here and that what is our equilibrium point?
It's right over there
and so, this would be our new price,
it has gone up
and this would be our new quantity,
it has gone down,
so price has gone up
and quantity has gone down
and once again, in either of these scenarios
hopefully this feels a little bit like commonsense.
If you have a supplier enter into the market,
quantity might go up
and there's more competition
and so, a lot more suppliers
and so, the price would go down.
Here where the supply goes down,
maybe some of the ice cream stores close down,
well, now the quantity will go down,
there's just less people supplying
but the price goes up.
For the ice cream that's there,
the equilibrium price is going to be higher.
Now let's do the same thing with the demand curve.
Let's think about a situation
where first let's think about a scenario
where demand goes up.
What is going to happen in this world?
Well, demand might go up
because maybe there's some type of report
that ice cream is much healthier for you
than expected and so, at a given price,
people are willing to demand a higher quantity,
so for example, at that price,
people would demand a higher quantity
and so, we would have a shift to the right and up,
let's call this D2 right over here
and this is our new equilibrium point
and then notice what has just happened here.
At our new equilibrium point,
this is Q2 and then this right over here
is P2, our new equilibrium price
or our new equilibrium quantity.
In this situation where demand goes up,
both price and quantity are going to go up
assuming we have this upwards sloping supply curve again.
And once again, that makes sense.
More people just wanna buy ice cream,
the supply curve dynamics have not changed,
so we're gonna move along that supply curve
to the right and up,
so both price and quantity go up.
Well, if demand goes down,
you could imagine the opposite is going to happen.
So, here if we have demand goes down,
let's say a big study comes out
that ice cream is even unhealthier
than we originally thought,
well, then at a given price,
people are going to want,
they're going to demand less ice cream
and so, our demand curve would shift to the left
and down, so we'll call this D2 right over here
and then we can see our equilibrium price and quantity,
so let's show that new equilibrium price
is P2 right over here
and then our new equilibrium quantity is Q2
and notice, both price and quantity go down.
People just don't wanna buy ice cream as much
because they think it's unhealthy now,
so price goes down and quantity goes down.