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3. Demand and Supply Videos & Notes Suggest Videos or Notes

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7 Videos & Notes
  • Supply Curve. Why is there a direct relationship between price and quantity supplied?
    Transcript: 1 In the supply curve, we want to know the relationship between price and quantity supplied. Let’s make it really simple by keeping everything else constant. That means ceteris paribus, 2 Great, only price and quantity left. As usual, we put the price on the vertical axis and quantity on the horizontal axis. JINGLE As producers, we love profits like bees love honey. Since price increases revenue, (pause) Increase in revenue increases profits, The higher the price, the merrier! 3 At $2, we’ll supply 10 cakes. But at $4, woah, higher price, Let’s supply more cakes. (20) Connect the dots. Tada, the supply curve! Note-- it’s upward sloping. When price increases, quantity supplied increases. When price decreases, quantity supplied decreases. The arrows are in the same direction. This is the law of supply: there’s an direct relationship between price and quantity supplied, ceteris paribus, given everything else constant. If you like this video, remember to like and subscribe. Next up: Change in quantity supplied vs change in supply _____________________________________________________ Why is there a direct relationship between price and quantity supplied? How does the supply curve look like? In a supply curve, the price is on the vertical axis and the quantity is on the horizontal axis. Since revenue minus cost equals to profit, as price increases, revenue increases, so profit increases. For producers, the higher the price, the better. So they will supply more goods. Hence, as price increase, quantity supplied increases. There is a direct relationship between price and quantity supplied. So the supply curve slopes upwards. In other words, the supply curve has a positive gradient. The law of supply states that there is a direct relationship between price and quantity supplied.
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  • The Demand Curve
    Transcript: In the demand curve, we are trying to find out what’s the relationship between price and the quantity that is demanded. Let’s make it really simple by keeping everything else constant. That means ceteris paribus, given everything else constant. Let’s freeze them! Wow, only price and quantity left. With these 2 variables, we can draw 2 axes. The convention is to put the price on the vertical axis and quantity on the horizontal axis. Remember, as consumers, we want to stretch our dollar. At $2, eww, apples are expensive, we’ll only get 1 apple. (pause) But at $1, woah, apples are cheaper now, we’ll get 3 apples. Then we connect the dots. Tada, the demand curve! Note-- it’s downward sloping. When price increases, quantity demanded decreases. When price decreases, quantity increases. The arrows are always in opposite directions. This is the law of demand: there’s an inverse relationship between price and quantity demanded, ceteris paribus, given everything else constant. Why? First, it’s because of substitution effect. When apples get more expensive, we substitute apples with something else, like oranges. So we buy fewer apples. There’s also the income effect. Given the same income, when apples get more expensive, our purchasing power erodes. We feel our wallets shrinking. Remember the summary from the previous video? Why did I state quantity demanded here and demand here? What’s the difference? If you like this video, remember to like and subscribe. Next up: Change in quantity demanded vs change in demand _____________________________________________________ Why is the demand curve downward sloping? Because there's an inverse relationship between price and quantity demanded. Why is there an inverse relationship between price and quantity demanded? Why does price and quantity demanded change in opposite directions? Why price increases, why does quantity demanded decrease? Well, it's because of the substitution effect and income effect. When the price of apple increases, for example, we tend to substitute apples with some other similar goods like oranges. In addition, when price increases, our purchasing power drops. With the same amount of money, we can now buy fewer goods. So our real income decreases and we purchase fewer goods. This is called the income effect. The law of demand states that there is an inverse relationship between price and quantity demanded. The higher the price, the fewer the number of people willing and able to buy a good. Hence, the demand curve slopes downwards. The gradient of the curve is negative.
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  • The Demand Curve
    Why does the demand curve slope downward? The demand curve demonstrates how much of a good people are willing to buy at different prices. In this video, we shed light on why people go crazy on Black Friday and, using the demand curve for oil, show how people respond to changes in price. Microeconomics Course: http://bit.ly/20VablY Ask a question about the video: http://bit.ly/21rcI9I Next video: http://bit.ly/1TG4Tvy
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  • Shifting of Demand and Supply Curves (Part II)
    Transcript: What happens when both demand and supply increase? An increase in demand causes quantity to increase, An increase in supply causes quantity to increase as well, Overall, quantity increases. What about price? Price increases here, Price decreases here, Overall, hmm… We don’t really know… Suppose increase in demand is huge, Demand shifts way to the right. Increase in supply is small, Supply shifts right just by a little. Equilibrium quantity increases. We already know this. Equilibrium price increases. Another way to think about this is, Because the increase in demand is huge, Price increase is huge. The increase in supply is small, Price decrease is small. Add up these opposing effects, Overall, there’s a small increase in price. What happens when the increase in demand and supply is the same? Demand shifts right. Supply shifts right, in the same way… Overall, quantity increases, that’s obvious. No change in price! Put a 0 here. Another way to think about it is Because demand and supply increase by the same magnitude, Price increases, Price decreases too, with the same magnitude. Overall, it’s a wash. So no change in price. When demand increases a little, Demand shifts to the right, just a little. When increase in supply is huge, Supply shifts way to the right. Overall, quantity increases, Again, that’s obvious. Overall, price decreases. A small increase in demand causes A small increase in price. A huge increase in supply results in A huge decrease in price. Add up these opposing effects, A small drop in price. Alright, cool. Oh we still have a few more combinations here. Holy crap! I’ll show you all the combinations here To make Economics easy for you. Stay with me. What happens when demand increases and supply decreases? Since price increases for both curves, Overall, price increases. Quantity increases here and decreases here. So we don’t really know what’s the overall change. When increase in demand is huge, Demand shifts way to the right. When decrease in supply is small, Supply shifts left, just a little Price increases. Quantity increases. When demand increases and supply decreases equally, Price increases, No change in quantity. When increase in demand is small, Decrease in supply is huge, Price increases, Quantity decreases. What happens when demand decreases and supply increases? Overall, price decreases. Quantity decreases here and increases here. We don’t really know the overall change. When decrease in demand is huge, Increase in supply is small, Price decreases, Quantity decreases. When demand decreases and supply increases equally, Price decreases, Quantity stays the same. When decrease in demand is small, Increase in supply is huge, Price decreases, Quantity increases. What happens when demand and supply decrease? Overall, quantity decreases. Price decreases here and increases here. We don’t really know the overall change. When decrease in demand is huge, Decrease in supply is small, Quantity decreases, Price decreases. When demand and supply decrease equally, Quantity decreases, Price stays the same. When decrease in demand is small, Decrease in supply is huge, Quantity decreases, Price increases. Here’s the summary. Some of the price and quantity changes are indeterminate Because it depends how far the curves shift. If you like this video, remember to like and subscribe. Next up: Marginal Cost and Marginal Benefit _____________________________________________________ Why does market equilibrium change all the time? Why do prices and quantities change all the time? Well, market conditions change and those cause demand and supply curves to shift, affecting price and quantity. To determine which curve shifts, we need to understand who is the party here concerned? Sellers or buyers? Which direction does the curve shift? How do price and quantity change? For instance, when more people prefer healthy good, demand for healthy food such as sushi and sandwiches increase, increasing price and quantity. There are other factors affecting demand too. For instance, price of substitutes and complements; future expectation of prices and population. The supply curve shifts too. When natural disaster hits, factors of production get destroyed. It gets more expensive to produce car, for example. Hence, supply of cars decrease, the supply curve shifts left, causing price to increase and quantity to decrease. In general, when demand increases, the demand curve shifts right. Price and quantity increase. When demand decreases, the demand curve shifts left. Price and quantity decrease. When supply increases, the supply curve shifts right. Price decreases and quantity increases. When supply decreases, the supply curve shifts left. Price increases and quantity decreases.
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  • Shifting of Demand and Supply Curves (Part I)
    Transcript: 1 The market equilibrium changes all the time 2 as demand and 3 supply conditions change. How do the curves shift? 4 First, we gotta know who cares? 5 Buyers or sellers? 6 Which direction does the curve shift? 7 How does price and quantity change? 8 Let’s recap. Here’s the factors affecting supply and demand. 9 Suppose income increases. People have more money, they buy more stuff. 11 Ah…it increases demand. 13 Demand curve shifts right. 14 Demand curve shifts right. 15 Price increases. 16 Quantity increases. 19 When income drops, 21 Demand decreases. 23 Demand curve shifts left. 24 Demand curve shifts left. 25 Price decreases. 26 Quantity decreases. 29 When wages decrease, Remember, labor is a type of input. 30 Input prices decrease, Producers can produce more with the same budget now. 31 So supply increases. 33 Supply shifts right. 34 Supply shifts right. 35 Price decreases. 36 Quantity increases. 37 When wages increase, 38 Input prices increase. 39 Supply decreases. 41 Supply shifts left. 42 Supply shifts left. 43 Price increases. 44 Quantity decreases. 49 Seems simple. Cool, what happens if both supply and demand curves shift? Check out the next video to find out. 50 If you like this video, remember to like and subscribe. _____________________________________________________ Why does market equilibrium change all the time? Why do prices and quantities change all the time? Well, market conditions change and those cause demand and supply curves to shift, affecting price and quantity. To determine which curve shifts, we need to understand who is the party here concerned? Sellers or buyers? Which direction does the curve shift? How do price and quantity change? For instance, when more people prefer healthy good, demand for healthy food such as sushi and sandwiches increase, increasing price and quantity. There are other factors affecting demand too. For instance, price of substitutes and complements; future expectation of prices and population. The supply curve shifts too. When natural disaster hits, factors of production get destroyed. It gets more expensive to produce car, for example. Hence, supply of cars decrease, the supply curve shifts left, causing price to increase and quantity to decrease. In general, when demand increases, the demand curve shifts right. Price and quantity increase. When demand decreases, the demand curve shifts left. Price and quantity decrease. When supply increases, the supply curve shifts right. Price decreases and quantity increases. When supply decreases, the supply curve shifts left. Price increases and quantity decreases.
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  • Market Equilibrium
    Transcript: 1 What is market equilibrium? It’s when quantity demanded equals to quantity supplied at a given price. 3 Can you guess where’s the market equilibrium here? 4 Yes, at $3, both Qd and Qs are equal, at 6. 5 Plot the values into a graph… (cut) 8 And this is simply the intersection between the demand and supply curves. 9 Wow, 10 when the amount the sellers want to sell is equal to the amount the buyers want to buy, Everyone is happy. Price is stable at market equilibrium. Anywhere else, price tends to change. 11 At a price below market equilibrium, 12 say at $2, sellers want to sell this amount. 14 Buyers? This amount. 16 There’s a shortage. 17 As sellers, with so many customers fighting to buy your goods, 18a,b Sit back and wait and jack up the price, boy! 19 As price increases, some buyers drop out. 20 More sellers enter. 21 Oh….back to market equilibrium. 22 At a price above market equilibrium, 23 Say at $5, 24 sellers want to sell this amount. 25 Buyers? This amount. 27 Eww…There’s a surplus 28a With so few buyers, 28b Better drop your price 28c Or risk not selling your apples at all. 29 As price drops, 30 some sellers drop out and more buyers enter. 31 Oh…back to market equilibrium. Again! So the market equilibrium price is the only point where price is stable. Wait a minute… 32 What happens if we have this super powerful firm that can influence price? 33 Well, we assume we have a competitive market. There are many similar sellers and buyers. With so many of them, none can influence price. 34 They are price takers. 35 The market sets the price. 38 And here’s the summary. If you like this video, remember to like and subscribe. Next up: Shifts in demand and supply curves _____________________________________________________ Why is price stable at market equilibrium? Market equilibrium is a point where the demand and supply curves intersect. At the point of intersection, equilibrium price and quantity are determined. This is where price is stable, that is, there is no tendency for the price to change. When price is below market equilibrium, quantity demanded is higher that quantity supplied, resulting in a shortage. This exerts an upward pressure on price and price increases until it reaches market equilibrium. When price is above market equilibrium, quantity supplied exceeds quantity demanded, resulting in a surplus. There is a glut of goods in the market which exerts a downward pressure on price. Price decreases until it reaches market equilibrium. In this model, we assume that this is a competitive market. In other words, there are many similar sellers and buyers. Each of them is so insignificant that none can influence price. Hence, the price is set through the invisible hand aka the free market.
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