Hey, how you doin' econ students.. this Is Mr. Clifford. Welcome to ACDC econ.
Right now we're going to talk about Shifting, Demand and Supply.
*music*
In previous videos, you learned about demand and why it's downward sloping.
You also learned about supply and why it's upward sloping.
And of course you understand the idea of equilibrium.
That is the only place where the quantity demanded exactly equals the quantity supplied.
You should also understand why when there's a change in price, that moves along the curves.
For example, when the price goes up, the quantity supply increases
and the quantity demand decreases, causing a surplus.
When the price falls below equilibrium, the quantity demand increases,
the quantity supply decreases and that causes a shortage.
And that's what happens when there's a change in price. It moves along the demand and supply curves.
But what if there's a shift in the entire curve?
Remember, we learned the shifters in previous videos.
There's 5 shifters of demand and there's 5 shifters of supply.
To understand what happens when there's a shift in demand or a shift in supply,
let's take a look at a scene from the movie "Frozen".
In this scene, Princess Anna walks into Wandering Oakens Trading Post
and we find out what happens when there's a change in a market.
"Big summer blowout! Half off swimming suits, clogs, and a sun balm of my own invention"
Using this example from Frozen, let's analyze the market for Sun Balm.
The point of learning supply and demand is to understand
what happens price or quantity when there's gonna be a change in a market. So this graph helps us to predict
what happens when we find out there's going to be a change. The change that happens is that summer
suddenly becomes winter. So what's going to happen to the supply or the demand for a sun balm?
Well, it's definitely an effect demand because it's going to affect consumers.
It's going to have no effect on supply or the production of sun ball.
Now is the demand going to go up or is going to go down?
Well of course the demand is going to go down because people don't want to wear sun balm during the winter time.
They want to wear it in the summer time. So the demand is going to decrease or a shift to the left.
The new equilibrium is right here and so the price and the quantity is gonna fall [Mm-hmm]
Big summer blowout.
Now it's time for you to practice.
I have six scenarios right here for hamburgers.
Your job is to figure out if it's going to be an increase or a decrease in demand or supply,
what shifter it is, and what happens to price and quantity for each scenario.
So get a piece of paper and draw six supply and demand graphs
and show on each graph what happens for each one of these scenarios,
and remember for each one of these things we're analyzing hamburgers.
Make sure to pause the video and then I'll explain each one, alright?
Good luck.
For the first one, new grilling technology would cause the supply to shift to the right or increase.
Now this is supply because this is something that's going to increase the production of hamburgers.
And remember, technologies are a shifter.
The graph tells us the price will decrease and the quantity is going to increase.
For number two, an Increase in the price of chicken sandwiches, a substitute,
is going to cause the demand for hamburgers to increase. Remember the price of related goods,
substitutes and complements, is a shifter of demand.
and if chicken sandwiches are more expensive, that means people are gonna buy more hamburgers
so the demand for hamburgers shifts to the right so price goes up and quantity goes up. [ah]
I'm gonna rock 'n roll all night..
For number three if the price of hamburgers decreases, that's not going to shift the curve.
Remember a change in price does not shift the curve. It moves along the curve.
So if the price goes down
the quantity and demand is going to increase.
The quantity supplied is going to decrease and that's going to lead to a shortage.
Don't forget. Price never shifts the curve.
For number four, if the price of ground beef, a key resource in the production of hamburgers,
increases, that means we're going to produce less hamburgers.
So the supply will shift to the left, price will go up, and quantity will go down.
And for the last one, if there's human fingers found in many restaurants,
that's going to decrease the demand for hamburgers, right? So the demand shifts to the left,
price goes down, and quantity goes down. So a real quick story...
One time I was doing that example in class and I had the student who said that it wasn't going to be demand,
it was going to be a supply shifter. The supply would go down.
So I walked up to him ,I said well
Why do you think it's going to be a supply shift? Not demand shift? And this innocent student says
Well, if your workers don't have any fingers then that means they can't produce as much
and so that's going to decrease supply.
[aaahhhh!]
Well, it's definitely going to be a demand shifter.
If there's fingers found in food, people aren't going to buy it. Demand's going to decrease.
Now whether you're in high school or college
you're taking microeconomics or macroeconomics. It's super important to understand supply and demand.
Understanding this graph is not just good for class.
It's also good for life. You can predict changes in the market.
It can help you if you're in business.
Or if your a consumer buying things because you know what's going to happen to the price and to the quantity .
Now I hope this video was helpful.
Make sure to take a look at the next video that's gonna explain price control,
something called price ceilings and price floors. And take a look at my review app for your
smartphone or tablet so you can get ready for the next test alright? Until next time.
You want to talk about a supply and demand problem? I sell ice for a living.
Oh, that's a rough business to be in right now. I mean that is really...
Mmm. That's unfortunate.