we are going to continue discussing demands this is demand part two and we're going to start off by talking about market demand last time we looked at someone's individual demand for gasoline and that it's someone's individual demand for movie tickets well Coca-Cola doesn't really care about your individual demand for Coke Exxon Mobil doesn't care about your individual demand for gasoline right what these companies care about is the market demands that's the demand of everyone put together for Coca-Cola or gasoline or movie tickets so what we're going to do today is think about how we can take individual demand to market demand so here we have four steps to estimate market demand so the first thing we're going to do is survey your customers ask them about the quantities they demand at each price so Levi's is interesting interested in understanding How many pairs of genes you will buy over the next five years as you can imagine it's an important question for a company that makes jeans they want to think get a sense of how big the market is holding other things constant How many pairs of genes do you expect to purchase so compare the price of genes so in price per pair so if genes cost 150 dollars how many will you purchase if they cost 125 and so on and they want you to answer the survey and say how many you would plan to purchase at these different prices so we're going to say that they give this survey to 500 people so we have Daniel jatam Kyle shiu Tori and 495 other people and we get their surveys back and so Daniel Daniel doesn't uh the price is 150 or 125 dollars he's not combined it it's too expensive price goes down to 100 he'll buy one pair who goes down to 50. he'll buy one more 25 one more we could do this for everyone to team will buy one if the price is 150 got to take the price down to 75 before he buys another 51 more 25 one more like that well now what we can do is we add up we take these two and these other three people who we name it 495 people we haven't shown and we're going to add up the quantity demanded by each person at each price and that will yield the total quantity demanded at each price here's what I mean so if we take all the people in our survey all the people not shown we find that if the price is 100 150 these 500 people will purchase 90 pairs of jeans the price goes down to 125 dollars these 500 people will combine to purchase 110 pairs of jeans and so on okay so notice now now we have is a demand curve we know for different prices what quantity will be demanded right that's what a demand curve is the relationship between price and quantity demanded and because we have a demand curve we can graph a demand curve so all I've done here is taking the numbers we just saw and put them on a graph so here 150 there's 90 units demanded so that's this point right here on the curve price of 150 quantity of 90. price of 125 quantity of 110. 5 on the 110 and so on notice demand slopes down right like we said we're going to keep seeing this this is what we expect to see as genes get less expensive people are going to buy more of them well this demand curve only includes the 500 people serving right this is not the demand for worldwide this is not worldwide demand this isn't even United States demand this is demand for 500 people we need to translate the survey demand curve into a market demand curve that includes everyone in the market Gale the quantities demanded by the survey respondents so they represent the whole market right so what we essentially we want to do is we need to make these 500 people stand in for our entire Market which might be the entire country an entire State the entire world so how do we do that well we're going to think about is a scaling Factor we want to multiply the survey responses by a scaling Factor what's the scaling factor it's the size of the market divided by the size of the survey which means the number of people surveyed so for example let's suppose that we're saying that we want these 500 people to represent our Market of 300 million Americans right so if we do 300 million Americans divided by 500 survey respondents we get 600 000 that's our scaling Factor one way to think about what this means is that every one of our 500 people surveyed represents 600 000 Americans so if our you know if uh Daniel buys one more pair of jeans at a certain price we think that that means 600 000 people are going to buy one more pair of jeans so now we do so now we've sort of showed our steps here we ran the survey we added up our demand we're multiplying by a scaling Factor and so our last step is just to multiply and plot our projection so 90 times 600 000 says at a price of 150 we expect Levi just sell a total of 54 million genes to arrogance oh you can plot that this is the total quantity demanded by the market at each price notice now our X scale has gone up to millions of pairs because we've scaled up our survey so we said that our price at 150 is 54 or at 150 we get 54 million sold 125 we get 66. so 150 54 million sold 125 about 64 million sold yeah now we can keep graphing and now we get our whole demand curve this is the price of genes and the equation between price of genes and the quantity demanded notice two nice things it still slopes down and it actually still has the same slope which we expect because we multiplied everything by this the scaling Factor so it kind of looks similar and there we have it our first market demand curve of the semester what do we observe well I mean price is lower quantity demanded is higher which means that the demand curve is downward sloping we can't say this too many times how demand slows down and what that means why does market demand slow down this is something kind of new let's think about why market demand slows down the first is what we call the Intensive margin the cheaper something is the more each customer buys right so we were thinking about about Darren's demand for gasoline we were thinking about the Intensive margin the cheaper gasoline got the more Darren body here the Intensive margin is the cheaper genes get the more in each individual buys you'll go from buying one pair to two two pairs to three the other thing we have is the extensive margin the cheaper something is the more customers you get and what we can think about here is when the price of a jeans is 150 there are plenty of people who aren't going to buy any so when the price goes from 150 down to 100 we have the the extensive margin as all the people who weren't going to buy any jeans who are now willing to buy some when they go down to 100. you can think about a lot of like um Tech Goods being like this right so like when iPhones first came out they were so expensive that not many people were buying them and then over time as technology has improved the um features of the iPhone have gone up um and so we have there are now more customers for the iPhone next we are going to learn about changes in demand this is one of the most important uh topics that we're going to cover in this course it's very important to differentiate to learn what we mean by changes in demand so the first thing we're going to talk about is movement along a domain curve that's really what we've been looking at mostly right what happens when price changes so here we have a demand curve for gasoline this demand tells us when the price changes how does quantity demanded change we're going to move along the curve to find out so according to this demand graph if price Falls from 450 a gallon down to forces four dollars and fifty cents a gallon down to four dollars a gallon quantity of gasoline demanded will increase from 30 million gallons to 40 million gallons how do we get that well at 450 kind of about here we're here price goes down to four dollars now we're going to be here which is 40 million think about we're moving along this demand curve down and to the right when price changes we move along the demand curve demand curves show us how quantity demanded changes when price changes that is the that is what that's what demand curves are for their entire existence the entire existence of a demand curve is to tell you how quantity demanded changes when price changes long that demand curve to see how much quantity goes up let's go back to the law of demand as price goes down quantity goes up all else held constant they haven't really talked much about this all else held constant now we're going to we're going to see that's a really important concept the demand curve shows how quantity purchase changes when price changes all else equal which means that if we change the price that's movement along the Curve what we call this this is important is a change in quantity demanded the reason we say it this this way is that you want to remember the demand curve is not moving we're not changing this demand curve we're just moving to a different point on it if quantity purchased changes due to anything other than a price change then the demand curve itself moves so changing something else we get movement of the Curve and this is what we call a change in demand the demand curve itself has changed this demand curve now looks different than it did before moved it could be steeper or flatter the main thing is that it's changed we're not just moving to a different point on it the actual whole curve has moved for example suppose Oprah decides to give everyone a Tesla reducing the demand for gasoline fueled cars this reduces the gasoline used at every price so what we mean is whether the price of gasoline is four dollars or two dollars or one dollar we're getting less gasoline to purchase because more people have Teslas this means that the demand curve itself moves this is a change in demand right so this says we'll say the price of gasoline doesn't change at all well even if the price of gasoline stays the same we are going to have less gasoline purchased you know what that's going to look like is like even if we hold the price constant at let's say three bucks we have moved the whole demand curve so we've gone from buying 60 million gallons a day to 30 million gallons a day and again that's even if the price doesn't change when we have a change in quantity demanded the only reason that quantity changes is if we move along the demand curve which means the only reason quantity would change is because price change here even holding price constant even if price doesn't change at all we are still going to get a change in quantity demanded because we've moved the whole curve we've gone from this curve to this one so let's um think about what it means to have an increase in quantity demanded versus an increase in demand an increase in quantity demanded that is when the demand curve stays the same we're just moving along it so specifically we're going to move down and to the right on the demand curve so again down and to the right price goes down quantity demanded goes up increase in quantity demanded how about an increase in demand that's an outward or right word shift of the demand curve so the whole demand curve is going to shift to the right how about the difference between a decrease in quantity demanded and a decrease in demand so a decrease in quantity demanded is price changes so price goes up and we move up and to the left on the demand curve a decrease in demand is an inward or leftward shift of the demand curve so the whole demand curve shifts to the left notice this is not a price change this isn't a this is a change in something other than price so even holding price constant we're going to see fewer units demand is this was our you know everybody has a Tesla now it doesn't need to buy gasoline we're going to see less gasoline demanded even holding price constant suppose you're watching the Nightly News and you hear a reporter say this due to a recent hurricane gas prices have increased by almost 50 cents per gallon and consumers have responded by significantly decreasing their demand for gas is the news reporter using the word demand the same way an economist would okay you can imagine reason I asked this question is because the answer is no demand did not increase there is movement along the demand curve so nothing at a given price people are still willing to purchase the same quantity of gasoline nothing changed about how much people like gasoline all that changed was the price this is movement along the demand curve so let's look at a couple of problems so the demand curve shifts from D1 to D2 D1 to D2 is this an increase in demand decrease in demand increasing quantity demanded or decrease in quantity demanded so the answer here is B this is a decrease in demand because demand shifted to the left holding price constant so even if price stays the same our quantity is going to go from here down to here we had a decrease in demand so for whatever reason people don't like the product as much as they used to the MSU basketball team has an excellent start to the season leading to more fans wanting to attend basketball games we're regarding demand for basketball tickets this is a leftward shift of the demand curve a right word shift to the demand curve movement up along the demand curve or movement down along the demand curve the answer here is B this is a right word shift of the demand curve so here's what that looks like that's an increase in demand due to a change in a non-price determinant so this wasn't saying the MSU did not change the price of basketball tickets what happened was something happened to make the people want to go to the games more so even holding price constant so you know maybe msu's they don't change the ticket prices halfway through the year so the ticket price is fixed they went from selling this many uh tickets to selling this many tickets MSU increases the price for student football tickets as a result fewer students attend football games this is a leftward shift rightward shift movement up along movement down along the answer here is C this is movement up and to the left along the demand curve and to the left why is that well nothing changed about how much people like going to football games all that changed is the price went up people responded accordingly price went up quantity demanded went down so people stopped going to the football games because they got more expensive due to the popularity of streaming services like Netflix and YouTube there has been a long-term downward Trend in the number of number of cable television subscribers regarding the demand for cable television this is an outward shift of the demand curve an inward or leftward shift to the demand curve movement up along the demand curve movement down along the demand the answer here is B this is an inward or shift of shift to the main curve demand shifts to the left and again what's going on here well something other than price change this isn't saying how did you know cable prices change that's not what the question says it says something else changed more streaming services and as a result demand shifted to the left which means that even if price stays the same the number of cable subscribers has gone from q1 down to Q2 alright that's all we have for today's class thanks for listening and uh we'll see the next video in which we will continue discussing uh demand thanks