Hello everyone, in this video you are going to learn about demand. From the buyers in the market, demand is being estimated. Before we actually move forward, we need to differentiate between demand and quantity demanded. Anytime people say quantity demanded means, if you know the price, at that given price, how much a consumer or a buyer is willing to buy. That's what comes quantity demanded.
Whereas demand is an economic model, example of an economic model. model. That means other things equal what are the different quantities of a good that will be purchased at different prices. That means you can't tell demand in one single number. Now when it comes to demand, demand we actually represent as a demand curve.
Okay so taking price on the vertical axis and quantity on the horizontal axis. You can simply write the graph something like this. Take the price as P and quantity here as price. increases, quantity decreases. That means the line will be something like this, downward slope.
That means entire line represents demand. If it is quantity demanded, simply take one single point. That point, whatever the quantity is there, that actually represents quantity demand.
Now let's eliminate some of the misrepresentations about the demand. Demand is a model with two variables, price and quantity demanded. It's any time wrong to say when the price increases, demand actually decreases. What people want to say is when price increases, quantity demanded decreases, not the demand.
Okay, so that means whenever price changes, we move along the demand curve, demand being the same, but quantity demand changing. Next thing we want to come to is law of demand. Law of demand means basically price and quantity demanded are inversely related.
Okay, so within the demand. curve you have to look at how these two are actually going that means demand curve is downward sloping next thing we want to look at is two types of demands that we estimate one is individual demand second is from the market point of view if it is individual demand all you have to ask is at different prices what are the quantities being purchased or quantities being demanded if you put all of them in terms of a model that means at one dollar purchasing 80 units and so on If you connect that, that exactly gives the demand. Change in quantity demanded means basically moving along the demand curve, moving from one point to other point.
Reason for that? Obviously, change in the price. When the price on the vertical axis changes, quantity demanded on the horizontal axis changes in the opposite direction.
Now, let's come to change in demand. What does change in demand mean? It's completely shift in the demand curve.
So, How does it shift? Simply you can consider demand curve being something like this. Okay, so from this, if it is increase in demand, we put it as going towards right. If it is decrease in demand, we show it as going towards left.
So when does the demand actually changes? It can't be price. There will be change in something other than the price that causes demand curve to shift either to the right or to the left.
Now, next thing I want to show it is in terms of graph, the same graph I drew it before. If it is on the same line, moving from one point to other point is change in quantity demand. If it is two different lines, that's what is change in demand.
Let's look at determinants of demand. That means what actually causes change in demand. First important thing or first important factor that causes change in demand is taste and preferences. Consumers taste and preferences change.
When preference for a good increases, demand increases and vice versa. Second one is consumer's income. This is a little bit more complicated. So when income increases, certain goods we consume more.
Those are the goods we call it as normal goods. That means when income increases, demand increases. When income decreases, demand decreases for these goods.
Whereas the other goods, some goods when income increases, we tend to consume less. Those are the goods we call it as inferior goods, such as let's say fast food. So we may not go to McDonald's or Burger King as often as we go when the income actually starts to increase. And of course, vice versa. That means if income decreases, the demand for inferior goods actually increases.
The third important factor in terms of changing demand is prices of related goods. That means when you're purchasing a good, you also compare with the other goods in the market. What is their prices and how that's going to influence the current good that you are looking at. There are goods something called as substitutes.
That means you can consume the first good or if you want to substitute that with the second good, that's a possibility. That's what we call substitutes. That means if price of the first good increases, you immediately shift to the second good. That means the demand for the second good actually starts to increase and vice versa.
If the price of the first good decreases, you are going to move away from the second good. That means the demand for the second good actually going to decrease. Whereas the other type of goods, we call it as complements. Complements means two goods consumed together, such as car and a gasoline. If your car runs on a gasoline, That means if you have to use your car, you need to use the gasoline.
In that case, if a price of one good increases, let's say gasoline price increases, the demand for the cars which run on gasoline actually starts to decrease. And of course, vice versa. Now, the fourth determinant is consumers'expectations.
So how consumers feel about the future, two things. One is about future prices. Second thing is about future income.
If they expect future prices to increase, they start to purchase more now, although price may not have changed, that causes the demand to increase. If they expect future income to increase, if it is a normal good, that means they start to purchase more of that particular good. Okay, so if it is inferior, exactly opposite.
Next one is number of buyers. Okay, so if you have more buyers in the market, that means there is more demand for that particular same way. If there is less buyers in the market, that means...
the demand for the gold is actually lower. That means it can go backwards towards the left.