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Current time:0:00Total duration:8:27

Change in demand versus change in quantity demanded

AP.MACRO:
MKT‑2 (EU)
,
MKT‑2.B (LO)
,
MKT‑2.B.1 (EK)
AP.MICRO:
MKT‑3 (EU)
,
MKT‑3.A.4 (EK)
,
MKT‑3.A.5 (EK)
,
MKT‑3.B (LO)
,
MKT‑3.B.1 (EK)

Video transcript

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 that 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 QD 1 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 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 2 and so to be very particular about this quantity demanded is associate with a particular point on the demand curve while the demand curve is a 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 it does what's described here in any way shift the quantity that would be demanded at that price well no this is not shifting how much consumers would want to buy at that price this is just this is 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 equivalent the equilibrium price and quantity demanded are associated with that point right over here before car dealers slash their prices so let's take all 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 a 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 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 in consumers will just have less money in their pocket the cost of of maintaining and using a car at any price would go up and so they might be willing to buy less cars because the 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 it could 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 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 can 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 a bullet point - now let's see here we say the state lowers vehicle registration fees pause this 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 D 3 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 high sold incomes is actually analogous in some way so the price of gasoline increases because people are just gonna have less incomes regardless of what point we are on the 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 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 bolt and it says hey car prices are going to double next year well then you could 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 save a change in a particular price you know 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 they're 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 too 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
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