Hey, how you doing Econ students? This is Mr. Clifford. Welcome to ACDC Econ.
Right now we're going to talk about shifting demand and supply. In previous videos you learned about demand and why it's downward sloping. You also learned about supply and why it's upward sloping. And of course you understand the idea of equilibrium.
That is the only place where the quantity demanded exactly equals the quantity supplied. You should also understand why when there's a change in price that moves along the curve. For example when the price goes up the quantity supplied increases and the quantity demanded decreases causing a surplus. When the price falls below equilibrium the quantity demanded increases the quantity supplied decreases and that causes a shortage.
And that's what happens when there's a change in price. It moves along the demand and supply curves. But what if there's a shift in the entire curve? Remember, we learned the shifters in previous videos.
There's five shifters of demand and there's five shifters of supply. To understand what happens when there's a shift in demand or a shift in supply, let's take a look at a scene from the movie Frozen. In this scene, Princess Anna walks into Wandering Oaken's trading post and we find out what happens when there's a change in a market.
Big summer blowout! Half-half swimming suits, clogs, and a sun balm of my own invention. Using this example from Frozen, let's analyze the market for sun balm. The point of learning supply and demand is to understand what happens to price or quantity when there's going to be a change in a market. So this graph helps us to predict what happens when we find out there's going to be a change.
The change that happens is that summer suddenly becomes winter. So what's going to happen to the supply or the demand for a sun balm? Well, it's definitely going to affect demand because it's going to affect consumers.
It's going to have no effect on supply or the product. of sun balm. Now is the demand gonna go up or is gonna go down?
Well of course the demand is gonna go down because people don't want to wear sun balm during the winter time. They want to wear it during the summer time. So the demand is going to decrease or shift to the left. The new equilibrium is right here and so the price and the quantity is gonna fall. Big summer blowout.
Now it's time for you to practice. I have six scenarios right here for hamburgers. Your job is to figure out if it's gonna be an increase or a decrease in demand or supply, what shifter it is, and what happens to price.
price and quantity for each scenario. So get a piece of paper and draw six supply and demand graphs and show on each graph what happens for each one of these scenarios. And remember, for each one of these things, we're analyzing hamburgers.
Make sure to pause the video and then I'll explain each one, all right? Good luck. For the first one, new grilling technology would cause a supply to shift to the right or increase.
Now this is supply because this is something that's gonna increase the production of hamburgers. And remember, technology is a shifter. The graph tells us the price will decrease and the quantity is gonna increase. For number two.
Number two, an increase in the price of chicken sandwiches, a substitute, is gonna cause the demand for hamburgers to increase. Remember, the price of related goods, substitutes and compliments, is a shifter of demand. And if chicken sandwiches are more expensive, that means people are gonna buy more hamburgers, so the demand for hamburgers shifts to the right, so price goes up and quantity goes up. Ah, one rug and row, I'm done! For number three, if the price of hamburgers decreases, that's not gonna shift the curve.
Remember, a change in price does not shift the curve. It moves along the. curve.
So if the price goes down, the quantity of man is going to increase. The quantity supplied is going to decrease, and that's going to lead to a shortage. Don't forget, price never shifts the curve. For number four, if the price of ground beef, a key resource in the production of hamburgers, increases, that means we're going to produce less hamburgers.
So the supply will shift to the left, price will go up, and quantity will go down. And for the last one, if there's human fingers found in many restaurants, that's going to decrease the demand for hamburgers, right? So the demand shifts to the left, price goes down. and quantity goes down. So a real quick story.
One time I was doing that example in class and I had a student who said that it wasn't gonna be demand, it was gonna be a supply shifter. The supply would go down. So I walked up to him and I said, well why do you think it's gonna be a supply shifter not a demand shifter?
And this innocent student says, well if your workers don't have any fingers then that means they can't produce as much and so that's gonna decrease supply. Ah! Ah! Well, it's definitely going to be a demand shifter. If there's fingers found in food, people aren't going to buy it.
Demand is going to decrease. Now, whether you're in high school or college, you're taking microeconomics or macroeconomics, it's super important to understand supply and demand. Understanding this graph is not just good for class. It's also good for life.
You can predict changes in the market It can help you if you're in business or if you're a consumer buying things because you know What's gonna happen to the price and to the quantity now? I hope this video was helpful Make sure to take a look at the next video That's gonna explain price control something called price ceilings and price floors and take a look at my review app for your smartphone or tablet So you can get ready for the next test. All right till next time You want to talk about a supply and demand problem I sell ice for a living That's a rough business to be in right now. I mean, that is really...
That's unfortunate.