- Law of demand
- Price of related products and demand
- Change in expected future prices and demand
- Changes in income, population, or preferences
- Normal and inferior goods
- Change in demand versus change in quantity demanded
- Lesson summary: Demand and the determinants of demand
Change in demand versus change in quantity demanded
In economics, "demand" refers to the entire curve that illustrates the relationship between price and quantity. "Quantity demanded" refers to a specific point on that curve, where a certain price is associated with a certain quantity. So, while demand encompasses the whole curve, quantity demanded is just one snapshot within it.
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- Can anyone please explain me how come slash in dealership prices won't result in change in demand curve? I have replayed the video many times and read the below explanations but failing to understand. Please assist!(25 votes)
- To elaborate on Andrew's comment, I believe you can say that there has to be a change in something other than price for the specific good or service you're talking about to shift the demand curve for that good or service. However, a change in price of another good or service that is either a complement or a substitute for the good or service in question can shift the demand curve for the good in question.
For example, in the video a change in price of gasoline (a complement for the good in question which is the car) does shift the demand curve for the car. Since you need gas to run a car then the price of gas is something that affects the overall cost of having a car and an increase in the price of gas means consumers can afford less of a car at all price points and vice versa for a decrease in the price of gas.
In the case of a substitute for a car, such as public transportation, a change in price for public transportation will make a car either more or less expensive relatively and would shift the demand curve for a car either right (if a car was now relatively less expensive to public transportation) or left (if a car was now relatively more expensive to public transportation).(20 votes)
- the 10% price cut happens to the entirety of the curve regardless where the price is sitting at, so wouldn't it shift demand and not quantity demanded?(7 votes)
- Sal explains it at1:52; I'll try to flesh it out a bit using an example:
Currently we sell 5 cars in category A at a price of $10,000.00, 7 cars in category B at $9,000.00, and 10 cars in category C at $8,100.00.
Lowering the prices by 10% will:
- decrease the price of cars in category A to $9,000.00 and increase their number of sales to 7;
- decrease the price of cars in B to $8,100.00 and increase their number of sales to 10;
- decrease the price of cars in C to $7,290.00 and increase their number of sales to (maybe) 14.
A shift in demand would mean, that the amount of cars being sold at $9,000.00 or $8,100.00 had changed, but that didn't happen: We could "only" observe an increase of sales, i. e., quantity demanded for the individual cars.(11 votes)
- Does that mean that a change in internal factors changes the quantity demanded whilst a change in external factors implies a demand curve shift?(5 votes)
- I'm not sure what you mean by "internal factors". A move along a demand curve represents a change in quantity demanded that is caused by a change in price. Any other change that affects demand that is NOT the price of the good shifts demand.(5 votes)
- When the price goes down in public transportation, quantity demanded increases it leads to change in demand, so it should be shifted to the right, but in this video you shifted to the left and I didnt understand why you did so?(2 votes)
- I think you are confusing two markets: the market for public transportation (like trains) and the market for cars. A decrease in the price of train rides would lead to an increase in the quantity demanded of train rides, not cars. The entire demand for cars decreases because public transportation is a substitute for a car. So when an alternative, like riding the train, gets cheaper, then no matter what the current price of a car is, demand will be lower.(8 votes)
- what is The Determinants of Demand(3 votes)
- Determinants of demand are the factors involved in causing consumers(the people buying products) to purchase goods and services.(5 votes)
- In the case where the price of gasoline increases leading to a decrease in demand (around4:00), would the effect depend on the vehicles gas usage? For example, if the price of gasoline goes up and this particular vehicle is very gas efficient, wouldn't the demand for that vehicle increase as well?
This could also apply the example with a recession and falling household incomes- if the vehicle is particularly economic, would this lead to an increase in demand?(3 votes)
- I still don't understand. When does the whole demand curve shift?(2 votes)
- Can someone explain to me the veichle registration fees example? If the price of the veichle is going down, how isnt that a movement along the curve? I dont really see how that would be different from the first example (which im also not sure I entirley understand)5:31(1 vote)
- So, vehicle registration fees are used by state DMVs in their respective registration process. This implies that, for the market of Brand x of cars, the dealership price does not change, so it would not be a movement along the curve. The only thing that this did change was cause the total cost of ownership for the car to go down, because now people who own/buy the car do not have to pay as much in registration fees as they did before. Now people can increase their demand for the car, which is why the state lowering vehicle registration fees causes a change in demand.(2 votes)
- The state lowers the vehicle registration fees.
Why does the demand curve shift?
Because it affects the price and when price decreases quantity demanded increases.
Maybe I am wrong. Can anyone explain?(1 vote)
- You're right. The demand curve for a certain car does shift to the right when the state lowers registration fees, because the overall cost of purchasing the car has gone down. Demand depends on if people want to purchase a good and if people can purchase a good. If the registration fee goes down, more people can purchase the good so the quantity demanded increases.(1 vote)
- I am a bit lost from7:50onward...(1 vote)
- He's saying that he'll explain the effect that supply has on demand and quantity demanded in future videos. I wouldn't worry about it just yet :)(1 vote)
- [Instructor] What we're going to do in this video is a deep dive into the difference between demand and quantity demanded. In particular, we're gonna focus on change in demand versus change in quantity demanded. And so just as context, I have price versus quantity here for brand X of cars in a certain market and you see the demand curve for brand X of cars and we see the it follows the classic law of demand. At a high price, there is a low quantity demanded, and so this is already trying to draw the distinction. A quantity demanded, so I'll call this qd1, is associated with a particular point on the demand curve, it's not the whole curve itself. When people talk about demand, they're talking about the whole curve. But just following on of what I just said, following the law of demand at a low price, this is associated with, if we go to the demand curve, a high quantity demanded, quantity demanded two. And so to be very particular about this, quantity demanded is associated with a particular point on the demand curve while the demand curve is the set of all of these points that show how price and quantity are associated. So with that out of the way, to make things more tangible, let's go through a bunch of different circumstances and think about whether they would result in a change in demand versus a change in quantity demanded. So in this first scenario we say car dealerships slash prices by 10%. Would that result in a change in demand, which would involve shifting our demand curve, or would it involve a shift along the curve, a change in quantity demanded? Pause the video and try to figure it out. Well, there's a couple of ways to think about it. In order to shift the demand curve itself the one way I think about it is if you were to pick a given price, if you were to pick a given price, does what's described here in any way shift the quantity that would demanded at that price? Well, no, this is not shifting how much consumers would want to buy at that price. This is just shifting the price itself. So this is going to be a shift along the demand curve. So this would be a scenario where maybe the equilibrium price, and we'll talk more about that in future videos, maybe the equilibrium price and quantity demanded are associated with that point right over here before car dealers slashed their prices. So let's call this quantity demanded, let's call that quantity demanded three. But then when they slashed their prices, the prices go down, and so we end up with this point on our demand curve, and so this would be quantity demanded, quantity demanded four. So this would be a change in quantity demanded right over here, so change, I'll do delta for change in, change in quantity demanded. And in this case, the quantity demanded would go up. What about the price of gasoline increases? Pause this video. Think about what would happen. Would that change the quantity demanded for the cars or would it shift the entire demand curve? Well, I'll do the same exercise. Pick a given price. Let's say we're at this price right over here and this is the current quantity demanded, now if all of a sudden, actually for any price that I pick, if the price of gasoline increases, consumers will just have less money in their pocket, the cost of maintaining and using a car at any price would go up, and so they might be willing to buy less cars because the operating cost has gone up. And this would be true at any price, at any price. And so one way to think about it is the entire demand curve, the way I've just phrased it, you could view for the entire demand curve would shift. So if we call this D1 here, now this would be D2. So here we would say change in demand, and in this case, our change in demand, it would shift, it would go down. You could view it as shifting to the left. Actually, let me write that as shifting to the left because that's what it looks like on this graph. Let's do this third example, prices of public transportation goes down, what would happen? Is this a change in quantity demanded or would it be a shift in the demand curve? Well, once again, for any, for any given price that we are talking about, whether we're talking about here or whether we're talking about here, the substitute or one of the substitutes, which is public transportation, is now looking more favorable. So you could imagine people at a given price will just not demand, the market will just not demand as much of a quantity. And so this, once again, would be a change in the demand curve. When something is true for any given price along the curve, then you know that you're going to be shifting the curve. So our change in demand, and once again, we're going to shift to the left, so it's similar to bullet point two. Now, let's see, here we say the state lowers vehicle registration fees. Pause the video and think about that. Well, once again, regardless of where we might be sitting along the demand curve now, if registration fees has gone down, now the total cost of ownership of a car has gone down, and so for any given price, people might be able to demand a little bit more car. And so here we would have a shift of the demand curve to the right. Shift of the demand curve to the right. We could call this D3 right over here. So we have a change in the entire demand curve, not just quantity demanded, and we are going to the right. Let's do this, what is this, the fifth example. A recession leads to falling household incomes. Pause this video and think about it. Well, falling household incomes is actually analogous in some ways to the price of gasoline increases because people are just going to have less incomes regardless of what point we are on the curve. People are just going to be able to buy less. So that's going to shift the demand curve, the entire demand curve to the left. So it's a shift in demand or a change in demand once again going to the left. Last but not least, consumers expect new car prices to rise next year. What is that going to do to either, is that going to be a change in demand or a change in quantity demanded? Pause the video and think about it. Well, once again, this is something that applies regardless of where we happen to sit at a given moment on the curve, whatever the equilibrium price is, and we'll talk more about that in other videos. This is generally going to apply to any point that we are on the curve. If people expect prices to increase, if all of a sudden there's a bulletin that says, Hey, car prices are going to double next year, well then you can imagine wherever we are on the curve, people are going to say, Oh, if car prices are going to double next year, I better buy more car right now, so our entire demand curve is going to shift to the right, so it's a change in the entire demand curve, and it is going to go to the right. So the big picture here, if we're talking about a change in, well you could say a change in a particular price, someone raises the price or lowers the price, well that's going to change the quantity demanded. And later when we draw the supply curve and we see where they intersect and you have an equilibrium price, when one or both of the curves shift, their intersecting point changes and so then you will, you could have a shift in the curves, which will then result in a change in the quantity demanded. But if we're talking about things that are generally true regardless of where we are on the curve, that will just affect people's general demand for something, that is going to shift the entire curve, it's going to be a change in demand versus a change in quantity demanded.