hey you guys didn't this is Jacob Clifford welcome to the macroeconomics unit one summary video knowing these summary videos I explained all the concepts over again beginning back in your brain to eat you ready for your exam or the final exam or your midterm or the AP test I'm gonna get you everything you need really quick I've organized this course based on the AP and macroeconomics curriculum but keep in mind if you're in college or even a master's program if you're learning macroeconomics all the key concepts are in here and be sure to check out my ultimate review packet it goes along with these videos includes tons of practice so as you're watching this video fill out the blank unit study guide then check your answers to verify you can do the calculations and draw a different graphs and make sure to the practice test and watch the exclusive videos that are all part of the package and the first unit is free so make sure to go download the unit 1 study guide and filled out as you're watching the rest of this video okay here we go macroeconomics unit 1 it all starts with the basic economic concepts so we're starting off with a scarcity opportunity cost the production possibilities curve they will talk about compared advantage and tray then demand supply and putting supply and demand together and finding equilibrium if it's your first time watching this video make sure to watch it all the way through but if you're just here to review you can click ahead based on these timestamps that tells you where each one of these topics are covered but remember in these summary videos I'm going super quick because I'm trying to get the concepts back in your brain but in the ultimate review package I have a breakdown that's going to tell you the different topics and links to those topics on YouTube so if you need to practice a specific topic and get that concept in your brain you'd of course go back to YouTube and verify you're getting now before I jump into any of the content there's one more thing we got to do do me a favor drop your pencil right now because there's nothing in front of you take out your fist and do this some out and then pinky out thumb out and then peek yeah just like this do this a couple times ok perfect alright that was round one okay round two I want you the same thing except with both hands so pinkies out thumbs up pinkies out thumbs up pinkies out thumbs out okay do this alright that's round two all right here we go last one round three I want you to pinky out thumb out at the same time and then pinky out thumb out just like this okay all right try this perfect there's two reasons I'm making you do this the first one is that economics is I'll clean the same way it starts off really easy there's gonna be all these concepts you like oh I totally get this scarcity easy right and then it starts getting a little harder and then it gets a lot harder and when it gets a lot harder you got to slow down you got to practice obviously I'm really good this I can do this all day long but that doesn't mean that you're good at so if you're watching me think oh he did that I get it it makes sense now you gotta practice and that's the second reason why we're doing this I want to find out if you can participate so if you just watch me doing this and you didn't do anything at all and you didn't practice you're probably not gonna get the most out of these videos you're not using them right so when I say okay stop practice drawing this graph or try doing this nilton review packet stop the video and practice because that means you're actually trying verifying you're actually getting it remember I'm really good at economics I can explain all the concepts I can draw those graphs and do those calculations really quick and it makes it look easy but it's not gonna be the same for you you are gonna have to practice the point is please participate and that's it now let's do this we're gonna start off talk about what economics is it's the science of scarcity scarcity is the idea that we have unlimited wants and limited resources so in your class it's the first thing your teachers gonna talk about most people think economics is about money it's not it's about limited resources so economics is how we deal with the idea that we can't have everything and we're forced to make choices it's really how individuals and societies deal with the idea of scarcity now there's some key terms I want you to go over there's a difference between microeconomics and macroeconomics and there's actually two different courses so if you're in college you're probably taking micro or macro and there same thing for the AP test microeconomics is the study of small economic unit so looking at firms and individuals and their decision-making and governments as well but macroeconomics is looking at the big picture the entire economy like inflation and unemployment and gross domestic product and how the economy is doing is a recession how can the government help to get out of a recession should the government help to get out of a recession these are all concepts you'll see a macroeconomics tradeoffs is another key concept it's all the things you give up when you make a decision but they're all the things not just one so what's the trade-off of watching this video well you could be watching some other video you could be hang out with your friends you could be sleeping the time watching this video has a cost that things that you're giving up but you can't do them all right you can only actually have done one the one best thing the thing you gave up is called your opportunity cost it's the most desirable alternative when a choice is made now most people think and we talk about costs we're talking about dollars and cents but it's not just that right there's other concepts for example who you should date you have to decide what's my opportunity cost if I date that girl for a date that guy who's the person I'm giving up by dating them now this concept is the most important concept in economics and most importantly it sets you up for what the point of the classes this class will change the way you make decisions it's gonna enlighten your mind to allow you to make better choices opportunity cost is the key to that whenever you make a choice guys think of well what am I giving up to make this choice so this happens for individuals businesses for the government this idea of opportunity cost is huge okay there's five key economic assumptions I'm gonna go over each one of them pretty quick the first one all resources are scarce we have unlimited wants and limited resources and because of that we're forced to make choices that everything has a cost your teacher probably already told you there's no such thing as a free lunch right so everything has a cost is something that you gave up to get it everyone responds to incentives and acts in their own self-interest right and then for number four everyone makes decisions by looking at the additional benefit in the additional cost of your decision so you weigh the benefits and cost of every decision and last one life can be explained kind of consigned of with grass you can use grass to explain life you can explain the economy with grass it's not perfect but you're gonna see a lot of graphs in this class starting here in unit 1 there's a couple other key terms I want to cover really quickly first one is the idea of investment now when you hear the word investment think of stocks and bonds and retirement accounts not in economics and economics investment is always when a business buys machines tools and capital for their own business so they're they're buying things to improve their business now I use the term I use this term capital you're gonna see that to let people think capital is money no no there's actually two types of good there's consumer goods which are made for direct consumption like pizza and there's capital goods capital goods or tools machines to produce stuff so blenders ovens knives those are the things for a pizza company that's their capital now there's also something called human capital human capital the knowledge and skills required to produce things so like a doctor goes to school the human capital and you can improve those things up for time now another thing you're gonna hear is something called the four factors of production when you produce something if you produce a computer produce a table if you produce a cell phone there's resources that go into it they can be categorized into four things land labor capital and some people say entrepreneurship so inside any product there are certain resources go into it who owns the resource determines what kind of economic system you have now let's look at the big picture scarcity means there's not enough for everyone so we have to figure out the best way to allocate our scarce resources now how we do that determine something called our economic system there's three three main economic questions every society has to answer what goods and services should be produced how it should be produced and who consumes those goods and services so how do you figure this how to run society well basically the idea is if you answer these questions the answers are all the government decides the government decides that's one way to run aasaiya tea and there's another way where individuals decide so the the way these questions are answered etre minh is your economic system it's the methods society uses to produce and distribute goods and services now there's really just two main types we're gonna talk about we go a lot more detail in other videos but the idea is centrally planned and free market economies the centrally planned economy is one where the government owns all the resources it owns basically the workers and tells them where they can work and what jobs they should have the basic ideas came from the idea of Karl Marx and there's a bunch of other people who push the idea of centrally planned economies now free market our capitalist economies come from the idea of a guy named Adam Smith he basically said let individuals decide what to produce and how to produce it and who gets it and let the market do it oh that's called capitalism now your standard ap or college introductory course is going to talk about free market economies they're going to focus on those because really that's where most of the world is doing the most important concept in capitalism is the idea of the invisible hand the invisible hand is the idea that societies goals we met as individuals seek their own goals so a business can't get rich and can't make money unless they do something that you want like if I produce cars I got make awesome cars I'm gonna make awesome computers I gotta make awesome phones if I don't then people aren't going to buy them so they're gonna make other people better off and so society's resources will go to the right place based on what we want produced competition and self-interest regulate the free market system now there's all sorts of situations this doesn't work with monopolies and externalities and other concepts you're gonna learn in this course but the idea the invisible hand is the reason why this computer was not made by the government that camera was not made by the government a lot of stuff around you is not made by the government it's regulated by the government that's true and that's not necessarily a bad thing but we don't want the government saying exactly what to produce and how much to produce and who gets it that system hasn't worked and that brings us to the idea of mixed economies a mixed economy is a system that has both free market and centrally planned like parts to it some government involvement and different things more government involvement in some countries than others but if you want to learn more go ahead and click on one of these you've got economic thinkers and you've got economic system I did those with the crash course people there's also a video of me going to China where this Chinese lady checked me out it's pretty funny take a look anyways let's move on now it's time for the key graph in this course something called the production possibilities curve now your teacher might call it the production possibilities frontier the point is it's all the same thing it's basically a model that shows the alternative ways we can use our scarce resources it's gonna show trade-offs scarcity opportunity cost efficiency hold on one graph that starts off with the chart this chart showing bikes and computers ABCD is all different combinations so we can produce all bikes and no computers or all computers and no bikes or some combination between so if you actually plot this you come up with the production possibilities curve each point represents a specific combination of the two goods we can produce at full employment using all of our resources so if we take the chart put it on a graph it's gonna look like this you've got bikes computers and you plot the different points and you've got boom right here production possibly is curve now a couple things you need to know first any point inside the curve is the idea of inefficiency if we're producing only two computers and two bikes or being inefficient with our resources if we're producing any point on the curve then we're actually producing what's efficient right we're producing using all of our resources all of our workers all of our factors of production to produce the stuff and outside the curve you can't produce the qty there's just not enough resources right so we could if there was more technology and better resources we could produce out there in the future but for right now for whatever reason we cannot produce right here at Point G okay there's a couple different shapes to this graph and I want you to take a look at it let's talk about calzones and pizzas notice when you produce another pizza you lose one calzone will you produce another pizza you lose another calzone when you produce another pizza you lose one more calzone and the opportunity cost here it's constant when every single time you produce a pizza you lose one calzone that's called constant opportunity costs and it shows you that resources between the two products are very similar right there you can use resources for pizza the same resources for producing the calzones now it's gonna result in a production possibilities curve that's a straight line now let's look at a different scenario let's look at pizzas and robots right here when I produce the very first robot I gain one robot but I've lose one pizza when I go here I gain one more robot but now I lose three pizzas later on I gain one robot and I lose ten pizzas notice I lost only one pizza here and now I'm losing ten pizzas something's going on it's called the law of increasing opportunity cost as you produce more of anything the opportunity costs to produce it's going to get bigger and bigger the reason why is because resources are not easily adaptable between the production of these two products pizzas and robots let me explain why with an example if we're producing combination a we're producing all pizza so all workers including workers that are better suited towards robots are working at producing pizza now when we move to combination B we're moving out those scientists and those people who are good at making robots we gain one robot and we don't lose very many pizzas because they're not particularly good at making pizzas anyways now if you keep doing that you're gonna keep moving resources away or out of producing pizzas towards robots but eventually you'll start using the resources that are better suited towards making pizza for example right here we get only one more robot but we're moving away these pizza makers who that's what their job is right Luigi working in the back of the pizza restaurant he's way better at making pizzas and he has robots so the opportunity cost is super high remember it's ten pizzas we have to give up moving from D to e again this is called increasing opportunity cost let's see if you understand it with another example we've got forks and spoons forks and apples which one of these is a straight line and which one is a boat out curved well right here forks and spoons straight line that's constant opportunity cost and a boat out Forks and apples that's increasing opportunity cost the idea here is you produce more and more spoons you're gonna give up the same amount of forks each time but if you produce more and more apples you give up a little bit of 4x and then more Forks and more fruits than a whole lotta Forks now I've made a bunch of videos explaining this concept in fact I've made something called econ movies if you haven't seen them take a look but I've explained it in this video I haven't I'm not gonna talk about shifting the production possibilities curve in this video but there is some practice questions on your packet make sure to try those because it's pretty self-explanatory if for whatever reasons we have like new technology this entire curve can shift outward right we get more Forks and more apples one of the things I do want to cover is the idea of growth in the future so take a look at two different countries we've got Panama over here we've got Mexico over here let's say here's the production possibilities curve for piano they can produce consumer goods in capital goods let's say they're producing a certain combination which is producing a whole lot of consumer goods now their future a growth curve I'll put right here is out here all right so they'll have growth over time they'll be able to produce more in the long run but over on this side take a look let's put another country and there's Mexico and they're producing this combination less consumer goods which sucks they're getting less bananas and clothes and stuff like that but they are getting a whole lot more capital goods the question is what can the future curve gonna look like for Mexico is it gonna be the same distance out as Panama is gonna be farther out is it gonna be less growth well it's right here there's gonna be way more growth why because capital is a resource the more capital you produce the more production you can do in the future because capital is a shifter of the curve you can get more output by producing more capital so I know it seems like I'm rushing through this stuff and I'm not trying to but trust me this first unit the beginning stuff is really easy that's why I'm going really fast trust me you're gonna get it it's easy now I'm gonna slow down this is something that's a lot trickier it's called specialization in trade it's this idea of comparative advantage all right it starts off easy the idea of absolute advantage people are sometimes better at producing than other people so some people can produce things better than other people this is the idea of absolute advantage can produce more output or they can use fewer resources produce the same output of some other person they're just better at making things now the United States probably has an absolute advantage in the production of shoots and we could probably produce some boatload of shoes if we wanted to because we could and we're just a very large powerful productive country but we don't produce shoes we could we probably could produce the most of the entire world but we don't we specialize in other things that we produce instead we let other countries specialize in shoes now that's the idea of comparative advantage compared to the advantage the idea of having the production having a lower opportunity cost so I can produce this at a lower opportunity cost than somebody else the United States produces very few shoes but we produce a whole lot of things like airplanes or CGI movies right movies like Pixar movies we produce a lot of computer movies because that's what we're good at and we have a lower opportunity cost in another country who can't produce those things the idea here is that countries should specialize in trade when they have a comparative antigen if you're better at producing something than I am and I'm not as good as that producing that thing and all specialized and thinking I'm really good at we both can trade and we can both benefit right so I'll trade you the movies you trade me the shoes we both walk away happier this is a production possibilities curve it shows you how much sugar and wheat the US can produce and how much sugar and wheat Brazil can produce now first question which country has an absolute advantage in the production of sugar well the United States they can produce 30 tons and Brazil can only produce 20 tons so United States can produce more sugar and who hasn't absolute advantage in the production of wheat well the United States they produced 30 and Brazil can only produce 10 so you can see United States has an absolute advantage in both now people assume that if United States can produce more of both we should produce both but we don't this is the idea of international trade and comparative advantage so I'm gonna work backwards here but stay with me let's say United States specializes in wheat and Brazil specializes in producing the sugar and they trade one wheat for one and a half sugar and I'll explain how I got that number later but just stay with me take a look at this new production possibilities curve this is the new numbers based on the trade if the United States producers all wheat then they can produce 30 wheat right there down here the produced in 30 wheats and they trade one of their wheat and they one and a half sugar they train another one wheat they get another one and a half sugar with the trade alright look down this number 20 wheat and 15 sugar 20 wheats it's right here 15 sugar is outside the curve they're producing in fact they're consuming not producing they're consuming outside the curve by trading because they're getting that sugar at a lower opportunity cost and if they produce themselves look at Brazil if Brazil produce all sugar they produce 20 sugar they can trade one and a half sugar to get one week another one and a half sugar for one leave another want to have sugar look at this number you're five and ten five sugar is here ten wheat is out here for both countries after trade their curves can shift outward and they can consume more than if they could produce on their own right that's the idea of the benefits of trade now the question is how did I get those numbers this is the tricky part what you got to do when you do these questions first you got to convert the graphs into a chart so I've got the countries u.s. and Brazil on the top I've got wheat I've got sugar now I just plug in the numbers the United States can produce 30 wheat or 30 sugar Brazil can produce 10 wheat or 20 sugar so absolute advantage is really easy to spot it just whichever country can produce more in this case so United States can produce more wheat they have an absolute advantage in the production of wheat and in sugar now trying to calculate comparative advantage to figure out the comparative advantage you got to figure out who has a lower opportunity cost so you have to calculate what's called the per unit opportunity cost for each country now it starts out pretty easy and the way I set it up is how I would do it with my students set up the chart draw it out every single time like this and practice this over and over again your review packet has several practice questions but don't do them yet wait till I cover this first and also many of your trick will keep watching for the u.s. one week costs one sugar if they produced ones wheat they're giving up one sugar that's their opportunity cost for the US when sugar cost one week that's an easy one now here's my question for Brazil how much does each one wheat cost well that right answer is two one week cost two sugar it's two sugars they could have produced but they can't produce it when they're producing wheat and on the other side each one of the sugar is the reciprocal it's one half so if they produce 20 sugar and the reproducing ten weeds well each one of the sugar cost 1/2 a we they gave up now that we have this we can figure out the comparative advantage because we can find out who has a lower opportunity cost so which country should be producing the wheat who has a comparative advantage and wheat well the United States they have a lower opportunity cost and only cost them one sugar compared to Brazil that cost them two sugars to have a lower opportunity cost when they write these questions you can't have a compared Vantage for both so if you see a test question you find out that US has a comparative management week you're done you know for a fact that Brazil has the comparative antigen sugar but it always work out that way but look at the numbers make sense to one half is less than one the point is to figure out comparative advantage you got to calculate something called per unit opportunity cost now there's two different types of questions there's output questions and there's input questions so for this one we've got Canada Mexico this is number of planes they can produce right here and this is the cars they can produce so planes and cars this is gonna be an output question now on a test question they would give you more information they say oh this is number of planes and cars that Canada and Mexico can produce but I'm just setting it up that's the idea of an output question now which country real quick has an absolute advantage in the production of planes well Canada they can produce more planes than Mexico which country has an absolute advantage the production of cars yeah Canada they can produce 20 and Mexico can only produce 10 so Canada has an absolute advantage in both goods very true now let's go look down here this next one is the idea of Australia u.s. this is number of phones if they produce 100 phones this is if they produce a thousand bikes this is number of hours it takes to produce those 100 phones now this is called an input question because the resource is what's variable here so 50 hours to take to produce 100 phones this one US takes 40 hours to produce 100 phones and over here I strove takes 20 hours per 1,000 bikes u.s. takes 10 hours produced those 2,000 bikes now the question is who has an absolute advantage in the production of phones the answer is the US notice now you're looking for a smaller number because we're looking for hours it's better to use fewer resource in this case fewer hours to produce the phones you know very who has an absolute advantage and the production of bytes well the US they take fewer hours notice the numbers exactly the same they're exactly the same numbers fifty forty twenty ten fifty forty twenty ten the what matters is what the questions asking if it's an input question that we're looking at ours or if an output question and we're looking at the number of things they're producing the stuff they're actually making now you can figure this question out by doing what I showed you earlier calculating the per unit opportunity cost for Canada so in this case would be one plane costs I'll put equal signs for cost a certain number of cards given up in this case would be two-fifths of a car given up right now you could do that but it's really time consuming and some students get uncomfortable it becomes difficult for them so here's a trick it's called the quick and dirty now the reason why it's called the quick and dirty because it is super quick but it's dirty it's so academically dirty it's just it's not cheating it's just like yeah you're not gonna learn anything you just it's just a trick that's gonna work every single time and all the people who didn't watch the video up to this point well they missed out because you're gonna get the quick and dirty go ahead and tell your friends about mr. Clifford did the quick and dirty with me it was exciting first you understand the idea that there's only two possible outcomes that's gonna happen here to get comparative advantage Canada should be producing the planes and Mexico would produce the cars right so it would be this situation right here it would be this I'm gonna draw a diagonal diagonal representing Canada would be producing planes and then Mexico cars or the other option is Mexico's gonna be producing the planes and Canada is in the car so this other is the other possibility remember you can't have a comparative advantage in all products they can't have a comparative antigen producing both so here's the quick and dirty so 50 times 10 gives you a certain total number of things produced which would be 500 right so that's again that's 50 times 10 well the other one is 40 times 20 40 times 20 is 800 now since 800 is more than 500 that means that is the right answer BAM quick and dirty no doubt about it guaranteed you can do all the other calculations if you want Mexico's gonna be producing the planes and the Canada is gonna be producing the cars right again here's how I got I multiplied the possible outcomes it's either this or this the one that gives me the most because that's what I want I want the most stuff right that means as a comparative advantage right that's the idea of getting comparative and it is and it is nerdy now let's go down here except remember we're doing an input question so we're doing the same thing it's 50 right here times 10 which we already said is 500 or it's gonna be the other option which is 40 times 20 which is 800 so which one's the right option well it's definitely 500 now you're going to use less hours to produce the phones and bikes and so no doubt about us should be producing the bikes and right here Australia should be producing the phones again you could do all the other calculations if you wanted to but this is a quick and dirty way to get the right answer okay how you doing you with me you get the concepts all right we're gonna take it to the next level when I learn this idea of what's called terms of trade terms of trade is that both countries can benefit but they don't benefit at every single term of trade for example they have to have a certain number of cars traded for a certain number of planes to benefit both countries so an example I gave you earlier was one week for one and a half sugar for brazillian us would benefit both countries how did I come with that number well that's what you're gonna figure out again it's called terms of trade it's agreed upon conditions that would benefit both countries so we've got an example question Kenya India pineapples radios thirty ten forty and forty what I want you to do right now is I want you to pause this video I want you figure out who has an absolute advantage in pineapples and radios who has a comparative advantage in pineapples and radios also I want you to try no you don't want to I know you want to do the quick and dirty but I want you to try to actually calculate the per your opportunity cost for each one of those and figure out who has a lower opportunity cost alright alright pause the video see how you do okay you got it here we go for Kenya each one of those pineapples cost one-third of a radio they gave up alright and each one of the radios cost three pineapples now though India is pretty easy it's one pineapple cost one radio one Radio cost one pineapple now that we're there it's time to figure out who has a comparative advantage who has a lower opportunity cost and it's easy because you have the numbers right pineapples one-third from sorry for Kenya it cost one-third of radio for India costs one radio who would you rather have producing the pineapples the one that is a lower opportunity cost so Kenya should produce pineapple again I'm circling the one that has the lower opportunity cost the one who should specialize in pineapples right India has a lower opportunity cost one compared to three lower opportunity cost and producing the radios and so they have a comparative antigen dirty to check to see if you're actually right 30 times 40 gives you twelve hundred forty times 10 gives you four hundred twelve hundred higher that must be its right answer done output question that's the quick and dirty but we're not done remember we have to learn something called terms of trade so we have to figure out each one radio can be trade for how many pineapples to benefit both countries I'll tell you right now one radio for ten pineapples is good for one country but not good for the other country and one radio for like a half a pineapple is good for one country but not the other so there's a range we have to get the right number in that range now I'll help you out figure out how you get this what you're gonna do is you look right here this tells you once you calculated this preened opportunity cost the number for one radios for a certain number of pineapples has to be between three and one all right for example two would work so one radio four to buy apples would benefit both countries but why is that well the reason why is this if Kenya Kenya produces radios by themselves so remember kinda kaha Kenya is producing pineapples right they're producing pebbles if they want to produce radios they're gonna make them themselves or they got a trade form if they make of themselves how much does it cost of well it cost them three pineapples alright so if they produced themselves costing three they'd rather trade two pineapples and did a radio then they would produce give up three pineapples and get one radio by producing themselves so this works for Kenyan they're like awesome that's a great trade it's better to give up two than three but now let's look at India alright they can produce pineapples on their own if they do it's gonna cost them one radio right so they produce the pineapple and it's gonna cost them one radio but in this case they can give up one radio and get two pineapples right they give up one radio because they're specializing in radios they can get two pineapples as opposed to giving up a radio and getting only one pineapple themselves so in this case one radio for two pineapples benefits both countries and that they terms of trade that is great for both of them boy that escalated quickly okay that was a whole lot and for many students compare advantage is the hardest thing for them to learn especially here in unit 1 so right now it's time to stop and fill out the unit study guide on the ultimate review packet to verify you're actually getting it so try an output question try an input question calculate the terms of crate see if you can actually do this right now and if you get all the answers right awesome keep watching this video but if you don't understand it go back to YouTube watch my topic video that covers a concept over again and make sure you understand compare bands that start the video back up now the last thing we're gonna do in this unit is talk about demand and supply in a market now this is super important I've made awesome videos on this already covering the topic so right now I'm gonna do a pretty fast summary I'm going click right now demand you already know this is what consumers are willing and able to pay and there's a relationship between price and quantity so the definition demand demand is the different quantities of goods that consumers are willing able to pay at different prices now there's something called the law of demand the law demands shows you that there's an inverse relationship between price and quantity demanded the price goes up for stuff people buy less of that stuff and the price goes down pillow buy more it's pretty standard everyone knows it that's the concept again it's called the law of demand now that means that there's a demand curve on a graph if you have price and quantity there's a demand curve in this case let's use milk if the price is up here right there at 5 not very many people are gonna want to buy milk but if the price is lower it only $1 per gallon the people gonna buy more and so that download sloping curve shows you an inverse relationship between price and the quantity demanded but a demand curve can also shift so if there's some other change other than price the demand curve can shift right or left so if milk makes you smarter there's some study that comes out says milk makes you smarter people who want more milk right and so every single price people gonna want more milk the entire curve will shift to the right that's called an increase in demand now if something else happens let's say milk causes baldness then that means less people want to buy milk the entire curve would shift to the left now it's important to understand this idea of curve shifting right and shifting left you're gonna do it a whole lot in this class now how about this one what happens to the demand for milk if the price goes up well you might be like oh the probably goes up demand will go down err no the quantity demanded goes down remember if the price goes up the quantity demanded goes down so the curve wouldn't shift it would just be a movement on the curve so the price would go up right the quantity would decrease moving along the curve not a shift in the curve now what shifts the curve is things other than price in fact here's the list of the five shifters of demand in the video that I was talking about covers these really well goes in more details and it gives you more practice and I'm going to do right here but those are the shifters of demand that's what caused the curve to shift now to the other side supply supply is the different quantities of goods that producers are willing able to sell at different prices and of course there's also the law of supply the law supply says and the price goes up producers want to produce more right because they can make more profit so price goes up I'm gonna produce more price goes down I'm gonna produce less that means we have a curve what's the curve looked like well it's an upward sloping curve right supply curve is upward sloping when the price is low from milk producers don't want to produce very many the price goes up from milk they want to produce a whole lot more but it can also shift right so for example if there's a new technology that produces milk faster that means the entire supply curve would shift to the right if the bunch of cows died I would decrease supply and shift it to the left remember increase is always right decrease is always less when it comes to supply and demand now that we understand that let's put supply and demand together right here we get the idea of equilibrium the man hits supply at in this case $3 for a gallon of milk and then the quantity is dot dot down right there in this case at 30 now that's the price and quantity that's gonna happen in the market any given time but there could be something weird happening for example if the price was really high let's say up here at $4 then we're at disequilibrium in this case the quantity supplied is greater than the client have made it right so the price goes up people don't want to buy it so the quiet Amanda goes down but producers want to produce more and so the client spike goes up the result is something called a surplus now the price was really low let's say down here at 2 then people want to buy more of it so the quite a man goes up but the price is low producers don't want to produce very many so they'll produce less quite a supply to go down the result is a shortage right the quiet Amanda is greater than client supplied that's the idea of a shortage now a surplus and the shortage might happen in the market but they don't stay that way equilibrium happens for a reason a shortage pushes the prices up a surplus pushes the prices down and a market should be at equilibrium when something weird happens now if you haven't seen it yet you should it's the indianajones econ movies it talks about supply and demand and there's pretty good stuff and introduces some of the ideas that you need to be able to do like the idea of shifting occurred so here we have an equilibrium for burgers demand supply and some price PE and quantity QE the question is what happens to the market for burgers at the price of ground beef triples so if the price of a key resource triples it doesn't affect demand it affects supply and if it triples that means that supply is going to decrease they can't produce as much as they could before when supply decreases it shifts to the left and you just read the graph right right there it tells you the price went up and the quantity went down right price went up quantity went down and that tells you what happened to market understand this general concept you can do a whole lot more of this stuff when it comes to aggregate demand and aggregate supply later in macroeconomics another key concept you have to understand is the idea of double shifts right so suppose the demand increase the same time supply increased well demand curve shift to the right supply curve shift to the right we started equilibrium right here we ended the equilibrium right here right so that tells you what happened on the graph and now it looks like quantity went up and priced a the same but remember when it comes to double shifts the idea price is indeterminate you can't tell it depends on the severity of the shift now I've got another video explaining that concept called double shifts but just right now remember there's a queue rule and the key rule is always when two curves shift at the same time either price or quantity is going to be indeterminate now the last thing I want to talk about is the idea of ceilings and floors the government can mess up a market they can come in and set a price at a different spot it some sort of regulation in this case a price ceiling is a maximum legal price a seller can charge for a product right so a price ceiling is below equilibrium when it's binding so that means the government says listen you can't raise the price higher than you know a dollar for gasoline and that might seem like a good idea but if you look at the graph it causes a shortage at a super low price producers don't want to produce anything or don't want to produce that product people want to buy it and then the result is a shortage price floor is different it's a minimum legal price a seller can sell a product so this case that the government is keeping the price super high keeping it from going down like you sell TSL corn for less than $300 can't lower the hot price lower than that the result as the graph says is right here with a surplus right so with a super high price producers want to produce a lot people don't want to buy it the result is a surplus again I know it seems like I'm rushing through this but the reality is I don't want to get bogged down in market so I want you understand the general idea it's gonna make a whole lot more sense when you look at the big picture later in unit 3 okay that was unit 1 if you didn't already do so fill out the unit study guide in the ultimate review packet to verify you're practicing and understanding all these different concepts also take a look at the next set of videos there to have practice questions where I'm giving you a multiple choice question and then I go over the answers to those questions that verify you're getting hey always thank you so much for watching my videos please make sure to subscribe to my youtube channel and let me know if you need anything else to help you learn and love economics thanks for watching until next time