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Changes in income, population, or preferences

AP.MACRO:
MKT‑2 (EU)
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MKT‑2.B (LO)
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MKT‑2.B.1 (EK)
AP.MICRO:
MKT‑3 (EU)
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MKT‑3.B (LO)
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MKT‑3.B.1 (EK)
In this video, we explore how changes in a few factors affect the demand curve. Changes in income, population, and consumer preferences cause the entire demand curve to shift.  Created by Sal Khan.

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  • leaf green style avatar for user adrien.shen
    So therefore, something that is free would have infinite demand? Such as khan academy?
    (50 votes)
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  • leaf grey style avatar for user Nathan
    I am really getting into preparing for my economics course in the fall. Has anyone found good practice problems/tests to supplement the microeconomics videos?
    (19 votes)
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  • aqualine ultimate style avatar for user Nuzhah Tarsoo
    Preferences are also largely affected by advertisements right?
    (13 votes)
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  • blobby green style avatar for user Rawit Assamongkol
    Hey Sal, big fan of this particular series. But I've got a minute question for this video, specifically about the population and the income. If the population goes up, then there'll be more people who would want your product; but if there are more people, wouldn't that mean that everyone has less income? And if population increases, then the "newer" population will be children. Wouldn't children take away some of that disposable income from their parents? Thanks in advance!
    (8 votes)
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  • leaf green style avatar for user danaubin4
    i want to ask a question to the author .why the population income affects demand and the poulation affects demand?
    (4 votes)
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  • old spice man green style avatar for user Harbinger 67
    Sal, I did the math, and as you raised the book price, even taking into account the lesser amount of people, one trend i saw, was that the your profit went up, even as the number of people buying the book drooped, was that intended or not?
    -Darth Revan
    (2 votes)
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  • piceratops seed style avatar for user Mandeq Jama
    I usually here from politicians about how prices for things are going up while income is staying the same; are incomes and prices related in such a way that incomes should increase as things are getting more expensive?
    (4 votes)
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  • leaf blue style avatar for user mcb raju
    if there is a change in others factors (not price or supply), will there be change in quantity demanded only or will change in demand also happens?
    (2 votes)
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  • aqualine ultimate style avatar for user Ethan
    What do we expect to happen to the price of pens when both the price of ink and the price of pencils increases? i know the answer that people will shift to pens more so demand increases and prizes go up.. i am just confused with the graph :( how to draw a graph for this question
    (3 votes)
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    • ohnoes default style avatar for user Tejas
      Increasing the price of ink will increase the cost of producing the pens, so the supply curve will shift left. Increasing the price of pencils will shift demand to the right because pencils are substitute goods. Both effects will result in increasing the price of pens.
      (2 votes)
  • blobby green style avatar for user Audrey Chu
    If you are given two demand curves and the preference for one curve decreases, that one curve should shift left. However, does this decrease in demand affect the behavior of the other curve? How about the market demand curve?
    (2 votes)
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    • leaf blue style avatar for user Akshay Patnana
      I am no expert but I believe it depends on the commodity. Say there are two curves in one graph. Curve 1 represents e-book 1 and curve 2 represents e-book 2. So as you were saying, if the e-book1's curve shifts to the left (meaning its demand falls), then e-book2's demand does NOT have to increase because when it comes to books, people do not have to buy one book or the other.
      But now say, the scenario changes, say one curve represents Aquafina (the water bottle company) and the other curve is Dasani. If the demand for Aquafina decreases for whatever the reason, then the demand for Dasani MUST increase because water is a commodity which is needed and people must have one or the other of.
      In such a case, when one curve moves to the left, then the other curve has to move to the right in proportion.
      (2 votes)

Video transcript

So we've been going through all of the other things that we were assuming are held constant in order to be moving along one demand curve. And now let's list a few other. And before I do any more of them, let's talk about the ones we already talked about. So one, we said that one of the things we held constant-- let me write this down. So held constant. One of the things that we held constant to move along one demand curve for the demand itself to not shift, for the curve to not shift, is price of related goods. The other thing we assumed that's being held constant is price expectations for our good. And now we'll list a couple of them that are fairly intuitive, but you'll see in the next few videos that there are often special cases even to this. So the other thing that we've been holding constant to stay on one demand curve is income. And this one is fairly intuitive. What happens if everyone's income were to increase? And in real terms, it were to actually increase. Well then, all of a sudden, they have more disposable income, maybe to spend on something like e-books. And so for any given price point, the demand would increase. And so it would increase the demand. And once again, when we talk about increasing demand, we're talking about shifting the entire curve. We're not talking about a particular quantity of demand. So income goes up, then it increases demand. Demand goes up. And remember, when we're talking about when demand goes up, we're talking about the whole curve shifting to the right. At any given price point, we are going to have a larger quantity demanded. So the whole curve, this whole demand schedule would change. And likewise if income went down, demand would go down. And we're going to see in a future video-- it's actually quite interesting-- that's not always the case. This is only true for normal goods. And in a future video we'll see goods called inferior goods where this is not necessarily the case. Or by definition for an inferior good, it would not be the case. Now the other ones that are somewhat intuitive are population-- once again, if population goes up, obviously, at any given price point, more people will want it. So it would shift the demand curve to the right, or it would increase demand. If population were to go down, it would decrease demand, which means shifting the whole curve to the left. And then the last one we'll talk about-- and remember, we're holding all of these things constant in order for demand not to change. The last thing is just preferences. We're assuming that people's tastes and preferences don't change while we move along a specific demand curve. If preferences actually change, then it will change the curve. So for example, if all of a sudden, the author of the book is on some very popular talk show that tells everyone that this is the best book that was ever written, then preferences would go up, and that would increase the total demand. At any given price point, more people will be willing to buy the book. If, on the other hand, on that same talk show, it turns out that they do an expose on the author having this sordid past, and the author plagiarized the whole book, then the demand will go down. The entire curve, regardless of the price point-- at any given price point, the quantity demanded will actually go down.