♪ [music] ♪ - [Alex] We're almost finished
covering demand, supply, and equilibrium. We just need to wrap up
one loose end. Unfortunately, economists
use similar terms for two things which are quite different. A change in demand versus a change
in the quantity demanded. We're sorry about
the confusing terminology but, alas, that's the way it is. Fortunately, you're already
familiar with these differences, we just need to point them out. Let's get going. A change in demand refers
to a shift in the demand curve. As we know, a change in demand,
a shift in the demand curve, is caused by one of the shifters --
income, population, changes in the prices
of substitutes, and compliments and so forth. A change in quantity demanded
refers to a movement along a fixed demand curve. And that's caused
by a change in price. Let's illustrate with the model. Begin on the left
with a change in demand, in this case,
an increase in demand. The increase in demand
shifts the entire demand curve to the right or up and leads,
as we know, to a higher price and quantity exchanged. No problem. Now, let's look at a change
in the quantity demanded on the right. Suppose, for example,
that the supply increases. Now, notice that an increased
supply increases the quantity demanded from QE1 to QE2. That's an increase
in the quantity demanded. In the first case on the left,
we have an increase in demand, the entire demand curve shifts out. In the second case on the right,
we have an increase in the quantity demanded. That is a movement
along a fixed demand curve caused by a shift, in this case,
in the supply curve. Well, if you guess
that the next thing that we're going to do
is to show the difference between a change in supply
and a change in the quantity supplied,
you'd be right. Let's do that now. A change in supply
refers to a shift in the entire supply curve
caused, as we know, by a change in costs
such as a change in technology or input prices and so forth. A change in the quantity supplied
refers to a movement along a fixed supply curve
caused by a change in the price. Okay, let's go to the model. On the left we begin
with a change in supply, in this case, an increase
in supply that shifts the entire supply curve
down into the right, thereby, generating a lower price
and greater quantity bought and sold. Now, on the right, suppose
that the demand increases. Notice that the increase
in demand increases the quantity supplied
from QE1 to QE2 along a fixed supply curve. The supply hasn't changed,
the supply curve hasn't moved, so the supply is the same
but the quantity supplied has increased. Again, on the left,
we have a change in supply, the entire supply curve shifts. On the right, we have a change
in the quantity supplied a movement along
a fixed supply curve caused, in this case,
by an increase in demand. That's it. The terminology
is a little bit tricky but if you follow
the curves closely, you won't get confused. Next up, elasticity. - [Narrator] If you want
to test yourself click "Practice Questions." Or if you're ready to move on,
just click "Next Video." ♪ [music] ♪