Current time:0:00Total duration:4:34
0 energy points
Created by Sal Khan.
Video transcript
We've been talking about the law of demand and how if we hold all else equal, a change in price, price goes up, the quantity demanded goes down and the price goes down, the quantity demanded goes up. So if you hold all else equal, ceteris paribus, we are just moving alone this curve depending on what price, but we started talking about what happens when you change some of those we've been holding equal. How does that change demand? The last video we talked about the price of related goods(price of related goods)and if the price of related goods change, both compliments and substitutes, (how that might change) how that might increase or decrease demand, the entire curve not just one particular scenario. Now let's talk about another one of those factors that we've been holding constant. Think about how that would change demand, the entire curve, if we were to change that and that's expectations of future prices. (Let do that in the screen) So Expectations... Expectations... of future prices. So let's say... So let's talk about our first scenario here, where let's say this curve, people didn't expect prices to change for my e-book and now all of a sudden, people expect there's a change in expectation. Now all of the sudden they expect the prices to go up going forward, So now expect the future price to go up. What's going to happen? If you expect the future price to go up and the good or the product in question is something that you can store, well, depending on how much you expected to go up, you're probably more likely to buy now buy before the price goes up. So regardless of what point on this curve, regardless of the price point in any one of those price points, people now, because they wanna, instead of buy it later, they wanna buy now; there are more the current demand will go up in any of these price points. So at $2 more people would wanna buy 'cause things gonna go up. At $4, more people would wanna buy 'cause things gonna go up and any of these price points, because now the expectations have gone from being neutral to now expecting prices to go up, it would shift the entire curve to the right, so this would shift the entire curve to the right, so this right over here is scenario one and depends on how much these changes to say how much these shift to the right, but it's just a general idea, this is scenario one, and the shifting on the entire curve, you could say they increase demand, so this is literally demand increasing. And when we talked about demand, remember, and I'm probably tired of me saying this, I'm not talking about particular quantity, I'm talking about the entire curve shifting to the right because people expect future prices to go up so the current demand went up, the current demand curve shift to the right, and now we can just take another side of that, imagine what happens in senario two, before people were neutral, that was our curve right there they didn't have any opinion about whether future prices would go up or down or maybe they just assumed they would gonna stay the same, and now they expect the future prices to go down, now expect future prices to go down and this is only gonna happen in consumer electronics all the time,(confused) you see whenever you buy a laptop or any type of electronic devices, you now assume the price will go down now what we are talking about is the change expectation so you are going from neutrality or let's say you are going from you expected them to go down but now you expected them to go down even faster and of all you see expected them to go down faster you are even less likely to buy them now. So if you expect if before you thought prices were going to be roughly constant, and now you expect them to go down, now you are gonna say wow, I didn't give price why don't I just hold off a little bit and wait a little bit so it's going to lower demand so in this scenario the whole curve will shift to the left at any given price point the quantity demanded will go down at any point of that curve, so the entire demand curve will be shifted to the left, so because of senario two demand was decreased.