Economics Shifting Supply and Demand
Welcome to the No Bull review session for students in AP macro and microeconomics last time we looked at the laws of supply and demand, today we are going to focus on shifting the supply-demand curves. Let’s begin with the rightward shift to the demand curve suppose that we have a market for video games which is initially at equilibrium with market price of fifty dollars and 80,000 video games, now suppose the video games become wildly popular causing the demand curve to increase to shift to the right. When that shift curves the market price will increase from fifty to sixty dollars, and the equilibrium quantity will increase from eighty to ninety thousand video games.
So when the demand increases are shipped to the right market price will always increase and the quantity will increase as long as the supply curve remains constant, now please notice that we moved point to point along the supply curve that is the quantity supplied increases but the supply curve itself stayed the same. Now let’s look at a leftward shift the demand curve suppose that video games and video game consoles are complementary goods, if the price is a video game console goes up if the demand for its complement video games is going to go down is leftward shift demand will cause the price to fall from p to p1 in the equilibrium calling the fall from q to q1.
So in demand shifts to the left it decreases the price will decrease and the quality will decrease, the supply curve does not move no shift in supply however we go point to point along the supply curve that means that the quantity supplied is moving from q to q1. Now let’s look at the determined or the shift factors the demand curve, these include tastes, and preferences, income price, expectations the market size or the number of buyers in the market, the price is a substitute goods and the prices of complementary goods.
If there is an increase in taste and preferences demand will shift to the right it increases, if there is an increasing income and a good is a normal good demand will increase as well. However if there is an increase in income and it is a market for inferior good demand would decrease price expectations means that if we expect the price to be higher in the future our demands in the current time will increase, if we have more buyers in the market the market size increases demand will increase.
If the price of a substitute good the increases the demand for the good will increase, if the price of a complementary good increases demand for the good will decrease. There is a lot to digest year so it is very important that you practice as many examples as possible, do the ones as teach you give you in class to get a review book get one review apps the more practice the better, now let’s look at a rightward shift to the supply curve suppose there or new sellers a video games on the market that means that the supply curve will shift to the right the market price year falls from fifty dollars to twenty eight dollars.
However the market quality will increase your 80,000 video games to 95,000 video games, so in the supply curve shifts to the right or increases the price will fall and the quantity will rise. Notice the demand curve does not shift as a result of this, instead there is point to point movement along the demand curves the quantity demanded increases from 80,000 95,000 video games but the demand curve itself stays put. If the price is about economic resources used to produce video games increase that will cause a leftward shift or decrease in supply curve, so here the market price increases from p to p1 one and the equilibrium quantity decreases from q to q1.
So there is a leftward shift the supply or decrease in supply the market price will increase in the market quantity will decrease the demand curve stays the same, here are the determinants or the shift factors a supply these include resource costs, product Indian technology, taxes and subsidies, the number of sellers in the market, price expectations, and the prices of other goods that use the same resources.
If resource costs go up that is the costs of production increase supply will decrease, supply ships to the left it productivity improves our technology improves supply will shift to the right supply increases. If the government increases taxes or reduces subsidies to sellers that is gonna raise the cost the production in reduce the supply, if there’s a increase in the number sellers in the market supply will shift to the right, if seller is expect future prices to be higher the reduce the supply in the present. If the price of another good that uses the same resources in production
increases the supply this good will decrease.
Again I know there is a whole lot here on the slide you have to practice so please do as many practice problems as you can, now that we’ve looked at changes in supply and demand separately let’s put them together what if the demand and supply current shift at the same time. But we do not know the magnitude ships what will happen to price and quantity so suppose that demand and supply increase at the same time, the price can go up, the price can go down, well the price can stay constant based on the ship’s.
The equilibrium quantity however will definitely increase with an increase in demand and increase in supply, now if demand decreases and supply decreases at the same time the price can go up it can go down or stay the same the prices indeterminate the quality we go will definitely decrease. If demand decreases at the same time the supply increases we know the price will definitely fall, but now it is the quantity that is indeterminate the quantity can go up down or stay constant.
If demand increases and supply decreases we know the price will definitely rise but the quantity can go up go down or stay the same, it is the quality that indeterminate. Thank you for watching other No Bull review session brought you by No Bull review books, I hope you enjoy this video on the determinants of supply and demand and the shifting up the curves.