NB1. Shifting Supply and Demand
Summary
TLDRThis AP economics review session explores the dynamics of supply and demand shifts. It illustrates how increased popularity of video games can shift the demand curve right, raising prices and quantities. Conversely, it explains how a price hike in complementary goods like gaming consoles can decrease demand. The video also covers determinants affecting demand and supply, such as tastes, income, and resource costs, emphasizing the importance of practice to grasp these concepts.
Takeaways
- 📈 When demand increases (rightward shift), the market price and quantity both increase, assuming supply remains constant.
- 📉 If the demand decreases (leftward shift), the market price and quantity both decrease, assuming supply remains constant.
- 🎮 The example of video games illustrates how changes in popularity can shift the demand curve.
- 🔄 Complimentary goods, like video games and consoles, have demand that is inversely affected by the price of the other.
- 📊 Determinants of demand shifts include tastes, preferences, income, price expectations, market size, and prices of substitutes and complimentary goods.
- 📦 A rightward shift in the supply curve, such as from new sellers entering the market, leads to a decrease in price and an increase in quantity.
- 🛒 The shift factors of supply include resource costs, productivity, technology, taxes, subsidies, the number of sellers, and prices of other goods using the same resources.
- ⚖️ When both supply and demand curves shift simultaneously, the final market price and quantity are indeterminate without knowing the magnitude of the shifts.
- 🔝 An increase in both supply and demand will definitely increase the equilibrium quantity, regardless of the direction of price change.
- 🔕 If demand decreases and supply increases, the price will definitely fall, but the quantity change is indeterminate.
Q & A
What happens to the market price and quantity when the demand for video games increases?
-When the demand for video games increases, causing the demand curve to shift to the right, the market price increases from $50 to $60, and the equilibrium quantity increases from 80,000 to 990,000 video games.
How does the price of a complementary good, like a video game console, affect the demand for video games?
-If the price of a video game console, a complementary good, goes up, the demand for video games decreases, causing a leftward shift in the demand curve. This results in a decrease in both the market price and the equilibrium quantity.
What are the determinants or shift factors of the demand curve?
-The determinants or shift factors of the demand curve include taste and preferences, income, price expectations, market size, and the prices of substitute and complementary goods.
What is the effect on the market when there is an increase in the number of video game sellers?
-An increase in the number of video game sellers leads to a rightward shift in the supply curve. This causes the market price to fall from $50 to $28, and the market quantity to increase from 80,000 to 95,000 video games.
How does an increase in resource costs for producing video games affect the supply curve?
-An increase in resource costs for producing video games causes a leftward shift in the supply curve, leading to an increase in the market price and a decrease in the equilibrium quantity.
What are the determinants or shift factors of the supply curve?
-The determinants or shift factors of the supply curve include resource costs, productivity, technology, taxes and subsidies, the number of sellers in the market, price expectations, and the prices of other goods that use the same resources.
What happens to the price and quantity when both demand and supply curves shift simultaneously?
-When both demand and supply curves shift at the same time, the price can increase, decrease, or stay the same, depending on the magnitude of the shifts. However, the equilibrium quantity will definitely change.
If demand decreases and supply also decreases, what is the indeterminate aspect of the market outcome?
-If demand decreases and supply also decreases, the price can go up, down, or stay the same, making it indeterminate. However, the quantity will definitely decrease.
What is the certain market outcome when demand increases and supply decreases?
-When demand increases and supply decreases, the price will definitely rise, but the quantity can go up, down, or stay the same, making the quantity indeterminate.
What advice is given to students regarding practice for understanding shifts in supply and demand curves?
-Students are advised to practice as many examples as possible, including those given by their teacher, or to use review books and apps to enhance their understanding of the shifts in supply and demand curves.
Outlines
🎮 Shifts in Demand and Supply for Video Games
This segment of the video focuses on the dynamics of supply and demand curves, specifically using the market for video games as an example. It starts with a scenario where video games become more popular, leading to a rightward shift in the demand curve. This shift results in an increase in both the market price from $50 to $60 and the equilibrium quantity from 80,000 to 990,000 units. The video explains that an increase in demand always leads to a higher market price and quantity, assuming the supply curve remains unchanged. The video then contrasts this with a leftward shift in demand, which occurs when the price of a complementary good (like video game consoles) increases, causing a decrease in demand for video games. This shift leads to a decrease in both the market price and quantity. The determinants of the demand curve are also discussed, including factors like taste and preferences, income, price expectations, market size, and the prices of substitute and complementary goods.
📈 Effects of Supply Shifts and Combined Changes
The second part of the video script delves into shifts in the supply curve. It uses the example of new sellers entering the video game market, causing a rightward shift in the supply curve. This shift leads to a decrease in the market price from $50 to $28 and an increase in the market quantity from 80,000 to 95,000 units. The video emphasizes that the demand curve remains unchanged during this shift, and it's the supply curve that moves. The determinants of the supply curve are also discussed, including resource costs, productivity, technology, taxes, subsidies, the number of sellers, price expectations, and the prices of other goods that use the same resources. The video concludes by exploring scenarios where both supply and demand curves shift simultaneously, discussing the indeterminate effects on price and quantity depending on the magnitude and direction of the shifts. It advises students to practice with various examples to better understand these concepts.
Mindmap
Keywords
💡Supply and Demand
💡Equilibrium
💡Shift of Demand Curve
💡Complimentary Goods
💡Determinants of Demand
💡Shift of Supply Curve
💡Resource Costs
💡Productivity and Technology
💡Taxes and Subsidies
💡Price Expectations
💡Indeterminate
Highlights
The session focuses on the shifting of supply and demand curves in the context of AP macro and microeconomics.
A rightward shift of the demand curve for video games leads to an increase in market price from $50 to $60.
An increase in demand results in a higher equilibrium quantity, moving from 80,000 to 990,000 video games.
The supply curve remains constant during a demand increase, with only a point-to-point movement along the curve.
A leftward shift of the demand curve occurs when video game consoles, a complementary good, become more expensive.
A decrease in demand leads to a fall in market price and a reduction in equilibrium quantity.
Determinants of the demand curve include taste and preferences, income, price expectations, market size, and prices of substitutes and complements.
An increase in taste and preferences or income for normal goods shifts the demand curve to the right.
Expectations of higher future prices can increase current demand.
A rightward shift of the supply curve due to new sellers entering the market decreases the market price to $28.
An increase in supply leads to a rise in market quantity from 80,000 to 95,000 video games.
The demand curve does not shift with an increase in supply; instead, there's movement along the demand curve.
A leftward shift in supply occurs when resource costs for producing video games increase.
Supply decreases when there's an increase in production costs, leading to a higher market price and lower quantity.
Determinants of the supply curve include resource costs, productivity, technology, taxes, subsidies, and the number of sellers.
Improvements in productivity or technology shift the supply curve to the right, increasing supply.
Government policies like taxes and subsidies can affect the supply of goods.
When demand and supply curves shift simultaneously, the price and quantity outcomes are indeterminate.
An increase in both demand and supply will definitely increase the equilibrium quantity.
A decrease in both demand and supply will definitely decrease the equilibrium quantity.
When demand increases and supply decreases, the price will definitely rise, but the quantity is indeterminate.
Transcripts
welcome to another Noble review session
for students of AP macro and
microeconomics last time we looked at
the laws of supply and demand today
we're going to focus on Shifting the
supply and demand curves let's begin
with the rightward shift of the demand
curve suppose that we have a market for
video games which is initially in
equilibrium at a market price of $50 and
80,000 video games now suppose that
video games become wildly popular
causing the demand curve to increase to
shift to to the right when that shift
occurs the market price will increase
from $50 to
$60 and the equilibrium quantity will
increase from 80 to 990,000 video games
so when the demand increases or shifts
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 our supply curve
that is the quantity supplied increased
but the supply curve itself stayed the
same now let's look at a leftward shift
of the demand curve suppose that video
games and video game consoles are
complimentary Goods if the price of a
video game console goes up then the
demand for its complement video games is
going to go down this leftward shift of
demand will cause the price to fall from
P to P1 and the equilibrium quantity
fall from Q to q1 so when demand shifts
to the left or decreases the price will
decrease and the quantity will decrease
the supply curve does not move no shift
in Supply however we go point to point
along our supply curve that means that
the quantity supplied is moving from Q
to
q1 now let's look at the determinants or
the shift factors of the demand curve
these include taste and preferences
income price expectations the market
size or the number of buyers in the
market the prices of substitute goods
and the prices of complimentary Goods if
there is an increase in taste and
preferences demand will shift to the
right it increases if there's an
increase in income and the good as a
normal good demand will increase as well
however if there's an increase in income
and it's a market for an inferior good
demand would
decrease price expectations means that
if we expect the price to be higher in
the future our demand 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 increases the demand for the good
will
increase if the price of a complimentary
good increases demand for the good will
decrease there's a lot to digest here so
it's very important that you practice as
many examples as possible do the ones
that your teacher gives you in class or
get a review book or get one of those
review apps the more practice the better
now let's look at a rightward shift of
the supply curve Suppose there are new
sellers of video games in the market
that means that the supply curve will
shift to the right the market price here
Falls from $50 to
$28 however the market quantity will
increase from 80,000 video games to
95,000 video games so when 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's point-to-point movement along
the demand curve the quantity demanded
increases from 880,000 to 95,000 video
games but the demand curve itself stays
put if the prices of economic resources
used to produce video games increase
that will cause a leftward shift or
decrease of the supply curve so here the
market market price increases from P to
P1 and the equilibrium quantity
decreases from Q to q1 so when there's a
leftward shift of Supply or decrease in
Supply the market price will increase
and the market quantity will decrease
the demand curve stays the
same here are the determinants or the
shift factors of Supply these include
resource costs productivity and
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 shifts to
the left if productivity improves or
technology improves Supply will shift to
the right Supply
increases if the government increases
taxes or reduces subsidies to sellers
that's going to going to raise the cost
of production and reduce the supply if
there's an increase in the number of
sellers in the market supply will shift
to the right if sellers expect the
future prices to be higher they'll
reduce the supply in the
present if the price of another good
that uses the same resources in
production
increases the supply of this good will
decrease again I know that there's a
whole lot here on this 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 curves shift at
the same time but we don't know the
magnitude of the shifts 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 or the price can stay constant
based on these shifts
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 price is
indeterminate the quantity we know will
definitely
decrease if demand decreases at the same
time that the supply increases we know
that the price will definitely fall but
now it's the quantity that is
indeterminant the quantity can go up
down or stay
constant if demand increases and Supply
decreases we know that the price will
definitely rise but the quantity can go
up go down or stay the same it's the
quantity that's
indeterminate thank you for watching
another Noble review session brought to
you by Noble review books I hope you
enjoyed this video on the determinance
of supply and demand and the shifting of
the curves
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