Demand and Supply Part 1
Summary
TLDRThis educational video delves into the demand side of the market, focusing on the market structure and the law of demand. It defines demand, explaining the importance of willingness and ability to purchase at various prices over a specific period. The video distinguishes between demand schedule and demand curve, illustrating the inverse relationship between price and quantity demanded. It further explores determinants of demand, including consumer income, price of related goods, consumer tastes, expectations, and the number of buyers, demonstrating how these factors influence market behavior. The video concludes with a look at the market demand as a summation of individual demands.
Takeaways
- đ Unit 5 focuses on the demand side of the market, aiming to build a comprehensive understanding of market structure from the consumer's perspective.
- đ The law of demand is introduced, stating that there is an inverse relationship between the price of a product and the quantity demanded, assuming all other factors remain constant.
- đ The distinction between a demand schedule (a table showing quantities wanted at different prices) and a demand curve (a graphical representation of this relationship) is clarified.
- đ·ïž Demand is defined as the amount of a product consumers are willing and able to purchase at various prices over a specific period, emphasizing both willingness and ability.
- đ The determinants of demand are explored, including consumer income, prices of related goods, consumer tastes and preferences, expectations, and the number of buyers.
- đ° The effect of income on demand varies; normal goods typically see increased demand with higher income, while inferior goods may see decreased demand as income rises.
- đ The price of substitute goods influences demand; an increase in the price of one substitute good typically increases demand for its alternatives.
- đ Changes in consumer tastes and preferences can shift the demand curve, with favorable changes leading to an outward shift and unfavorable ones causing an inward shift.
- đ¶ The number of buyers in the market affects overall demand; an increase in buyers leads to an outward shift in the demand curve, while a decrease leads to an inward shift.
- đ Market demand is the aggregate of individual demands, highlighting the summation of preferences and behaviors from all consumers in the market.
Q & A
What is the primary focus of Unit 5 in the video?
-Unit 5 focuses on the demand side of the market, aiming to build the market structure by examining various aspects of demand.
What is the definition of demand as given in the video?
-Demand is defined as the amount of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.
What is the law of demand?
-The law of demand states that, ceteris paribus, an increase in a product's price will reduce the quantity of it demanded, and conversely, a decrease in price will cause an increase in the quantity demanded.
What is the difference between a demand schedule and a demand curve?
-A demand schedule is a table showing the total quantities of a good or service that buyers wish to buy at each price, while a demand curve is a graph illustrating the relationship between the total quantities of a good or service that buyers wish to buy at each price.
What are the determinants of demand discussed in the video?
-The determinants of demand discussed in the video include the own price of a commodity, income, price of related goods, consumer tastes and preferences, consumer expectations, and the number of buyers.
How does an increase in income affect the demand for normal goods?
-An increase in income for normal goods leads to an increase in demand, causing the demand curve to shift out and to the right.
What is the effect of income on the demand for inferior goods?
-For inferior goods, an increase in income leads to a decrease in demand, causing the demand curve to shift down and to the left.
How do the prices of substitute goods affect the demand for a product?
-When the price of a substitute good increases, the demand for the related product increases, causing the demand curve for that product to shift out and to the right.
What is the role of consumer tastes and preferences in determining demand?
-A favorable change in consumer tastes or preferences for a product will increase demand, shifting the demand curve out and to the right, while an unfavorable change will decrease demand, shifting the curve down and to the left.
How does the number of buyers influence market demand?
-An increase in the number of buyers leads to an increase in market demand, shifting the market demand curve out and to the right, while a decrease in the number of buyers reduces market demand, shifting the curve down and to the left.
What is the market demand and how is it derived?
-Market demand is the total demand for a product by all consumers in the market, which is derived by horizontally summing the individual demands of all consumers at each price level.
Outlines
đ Introduction to Unit 5: Market Structure and Demand
Unit 5 delves into the market structure, focusing on the demand side. The video begins by defining demand as the quantity of a product consumers are willing and able to purchase at various prices over a specific time. It emphasizes the importance of considering a range of prices and the time frame for understanding consumer behavior. The distinction between demand and quantity demanded is highlighted, along with the law of demand, which states that higher prices lead to lower quantities demanded, assuming other factors remain constant. The outline for the unit includes discussions on the law of demand, demand schedule, demand curve, and the determinants of demand.
đ Demand Schedule and Curve: Visualizing Consumer Behavior
This section explains the difference between a demand schedule, which is a table showing quantities of a good buyers wish to purchase at various prices, and the demand curve, a graphical representation of these quantities at each price. The video uses an example to illustrate how changes in price affect the quantity demanded, plotting these points to form the demand curve. It visually demonstrates the inverse relationship between price and quantity demanded, as stated by the law of demand.
đ° Determinants of Demand: Factors Influencing Consumer Choices
The video explores various factors that influence demand, starting with the own price of a commodity. It discusses how changes in price lead to movements along the demand curve. It then differentiates between normal goods, where an increase in income leads to increased demand, and inferior goods, where an increase in income decreases demand. The impact of the price of related goods, such as substitutes and complements, on demand is also examined. The section concludes by mentioning other determinants like consumer tastes, expectations, and the number of buyers.
đ Price Changes and Substitutes: Shifts in Demand Curves
This part of the video script focuses on how price changes for substitute goods affect demand. It uses the example of Fanta and Mirinda to explain that when the price of one substitute increases, the demand for the other typically increases, causing a shift in the demand curve. The video also touches on consumer preferences and how changes in these can lead to shifts in the demand curve. It provides a graphical illustration of these shifts, showing how an increase in preference leads to a rightward shift, while a decrease leads to a leftward shift.
đ Consumer Expectations and Market Demand: Anticipating Price Changes
The video discusses how consumer expectations about future price changes can impact current demand. It gives an example of how expecting a price increase might lead to higher current demand, while expecting a price decrease could reduce current demand. The section also explains how market demand is calculated by summing individual demands, using a hypothetical scenario with two households to demonstrate how market demand is the horizontal summation of individual demands at various prices.
đ§ Conclusion and Contact: Looking Ahead to the Supply Side
The video concludes with a summary of the determinants of demand and a reminder of the upcoming session, which will focus on the supply side of the market. The presenter invites viewers to send questions to an email address provided. This section serves as a wrap-up, encouraging interaction and setting the stage for further learning.
Mindmap
Keywords
đĄDemand
đĄLaw of Demand
đĄDemand Schedule
đĄDemand Curve
đĄDeterminants of Demand
đĄQuantity Demanded
đĄNormal Goods
đĄInferior Goods
đĄSubstitute Goods
đĄComplementary Goods
đĄCeteris Paribus
Highlights
Unit 5 focuses on the demand side of the market, building the market structure.
The law of demand states that higher prices lead to lower quantity demanded, assuming other factors are constant.
Demand is defined as the amount of a product consumers are willing and able to purchase at various prices over a specific period.
Willingness and ability are key components of demand, as consumers must both want and be able to buy a product.
The demand schedule is a table showing quantities of a product buyers wish to purchase at each price.
The demand curve is a graphical representation of the quantities of a product buyers wish to purchase at each price.
The determinants of demand include own price, income, price of related goods, tastes, consumer expectations, and the number of buyers.
Normal goods' demand increases with income, while inferior goods' demand decreases as income rises.
The price of substitute goods affects demand; an increase in the price of one leads to an increase in demand for its substitutes.
Consumers' tastes and preferences can shift the demand curve for a product, with favorable tastes increasing demand.
Expectations about future price changes can influence current demand for a product.
The number of buyers in the market affects overall demand, with an increase leading to a rightward shift in the demand curve.
Market demand is the sum of individual demands from all consumers in the market.
The demand function considers various factors including own price, income, and tastes, among others.
The demand curve is derived by holding all other factors constant and focusing solely on the effect of price on quantity demanded.
Contact information provided for further inquiries about the course material.
Transcripts
hello so we start unit 5 and in this
video we are going to look at the demand
side of the market so unit 5 is about
the market but specifically we want to
build the market structure from here and
here we'll look at the demand and your
host elias let me quickly take you
through the outline so the first thing
we'll look at is the law of demand and
that before going to the law of demand
we would define a demand and try to
describe its structure and then later on
we'll distinguish between demand
schedule and demand curve so what we
will have to make serious distinctions
here
between what a schedule is and what we
consider a curve in this course and then
we'll conclude by looking at the
determinants of demand and the quantity
demanded and at this point we are going
to distinguish between demand and
quantity demanded for further readings
you can look at monkey chapter 4 in
meconium chapter 3 ok so let's start by
defining the demand so demand is the
amount of a product that consumers are
willing and able to purchase at each of
a series of possible prices during a
specified period of time now you will
notice that when we are defining demand
number one we are looking at a series of
prices so we have a series of possible
prices and we are also looking at a
specified period of time not
just at a point in time meaning for us
to consider demand we need to have a
series at different or various amounts
of prices and then over a specified
period of time if price was to increase
tomorrow
how will the consumer behave in terms of
purchases of the given product is the
consumer going to buy more or less
basically we know that for demand for a
basic demand function or demand curve we
will note that there will be an industry
elationship because the higher the price
the lower the quantity demanded so the
other thing we look at is the
willingness and ability which is part of
the demand definition okay so this means
that the manege shows the amount of the
product that will be purchased at
various possible prices
hoarding other factors constant
therefore we should note two things two
main things that stand out from the
definition of demand number one is that
we are seeing the willingness of
consumers to purchase the commodities at
various possible prices so the consumer
must be willing to obtain the items not
only it should the consumer be willing
but the consumer should or must also be
able to buy those commodities this means
that for demand to be defined an
individual consumer group cost of
consumers must be willing and able if
the consumer is willing but has no
capacity to pay for the items or is not
able to pay for the items then we will
not be able to define his or her demand
in the same way if the consumer is able
to pay for the items but he or she is
not willing to get them we will
about define his or her demand it short
for one's demand to be defined there
must be willingness and ability okay so
let's now look at the law of demand
which says that other things equal an
increase in a product's price will
reduce the quantity of it demanded and
conversely the decrease in price will
cause an increase in the quantity of it
demanded this implies that there is an
inverse relationship between the price
of a given commodity and its quantity
demanded okay so we make an assumption
of what in other things equal here or
ceteris paribus because demanded for a
product is not only affected by its own
price by the price of that item it is
affected by many other factors that we
need to consider in the consideration of
what demand is but all we've done is
we've simplified the model when trade
graph we are wanting all other factors
or keeping the influence of other
variables constant and then observe the
behavior of quantity demanded when price
changes okay so we woke ten our focus to
the determinants of demand after we look
at the distinction between the demand
schedule and the demand curve okay so
let's look at the demand schedule and
the demand curve so with the demand
schedule schedule is simply a table and
therefore a demand schedule is a table
showing the total quantities of a good
service that buyers wish to buy at each
price and the demand curve is a graph
showing the total quantity or total
quantities of a good or service that
buyers wish to buy at each price now
when we say at each price it means that
we have a series of prices and then we
want to consider only a given price so
as we move down the curve we will be
seeing the different amounts of a
commodity pay just as prices will be
changing in in a visual form a demand
schedule looks like this where we have
prices ranging from 0 to 8 as an example
and the quantity demanded of it reducing
from 8,000 down to 0 so when the price
is 0 the consumer would want to get
8,000 units and for the increase in
price to to the consumer reduces the
quantities purchased to 6000 and
increase in price further to four leaves
the consumer to reducing the quantity
demanded to 4,000 and if the prices
continues to rise the prices continue to
rise the quantity demanded will continue
to form let's plot this data now which
we have in the schedule on the demand
curve with price on the vertical axis in
measured in the net kwacha and the
quantity demanded measured in thousand
on the horizontal axis we can have the
price figures and the quantity demanded
figures now we note that when price is 0
quantity demanded is 8,000 prices - what
did one date will be 6,000 all the way
to when prices ate quantity demanded
who becomes ill and this if we plot them
then our data points will look like that
joining these points together gives us
the demand curve hence the demand curve
for a product shows that there is an
invest relationship between the price of
a commodity and the quantity demanded of
it the higher the price the lower the
quantity demanded as postulated by the
law of demand let's now look at the
determinants of demand and the quantity
demanded the first determinants we look
at is the con price then we also have
income we have the price of related
goods we have the tests for the consumer
the consumer expectations the number of
buyers now you should note that these
are not the only determinants of demand
okay so let's look at on price now the
on price of a commodity affects the
quantity demanded
because when related mod care we hold
other factors constant then the change
in on price will only affect the
quantity demanded of it and not the
entire demand for a consumer so we see
that from our previous table or graph we
see that when price is at age
quantity demanded would be zero when
price changes to six quantity demanded
increases to 2004 a further reduction in
price what we demanded increases
therefore the change in price will cause
a movement along the
and Kev okay so the other determinant is
the income now the effect of income on
the demand of a product differs
depending on the nature of the product
now in basic maybe thinking you might
think that when income increases your
demand will increase well there are
other commodities whereby income
increases and you end up reducing the
demand for that product as such when
looking at the effect of income on the
demand for a product we distinguish
between
dhama Goods and inferior Goods let's
start by looking at the normal Goods and
see the effect suppose that you consider
meat to be a normal good and that there
is an increase in your income as a
result of that with the price on the
vertical axis and quantity demanded on
the horizontal axis we note that with
our individual demand you increase in
income for a normal good will cause the
demand for meat to increase and when
your demand increases it means that you
will be able to buy more units because
your purchasing power has increased and
as such the demand curve will shift out
to the right so for normal Goods an
increase in income leads to an increase
in demand and therefore the demand curve
that is the entire demand curve will
shift out and to the right if there is a
reduction in your income if there is a
reduction in your income it means your
demand for meat which we've assumed to
be our classic
here will reduce and the reduction in
your yo-yo demand we mean that the
demand curve will shift down and to the
left therefore an increase in income for
normal good increases the demand and a
decrease in income for a nominal good
reduces the demand let's look at the
effect of inferior Goods now for
inferior Goods develop goods are goods
whose demand reduces when your income
increases now I will use a a painter
here because if you consider a painter
to be an inferior good and meat to be a
normal good it means that when you have
more money you will buy more meat than a
better in other words you will reduce
your consumption of kapenta in favor of
meat this means that for a reduction in
your income you have more incentives to
buy an inferior good which is capital so
consider price on the vertical axis and
demand on the horizontal axis and that
we are we are facing a reduction in the
income of the consumer and with a
classic example of capita here it means
that your demand for the painter will
increase because you will not be able to
afford meat or if you wanted to buy meat
you will not buy as many quantities as
you you but if your income was not
affected therefore your increase in
income limini reduction in income has
caused you to shift your purchases and
increase the petals of capital which is
an inferior good therefore the demand
for the inferior good will increase when
income reduces and the demand
shifts out unto the right if there is an
increase in your income with our
initiative many of you are and you have
experienced an increase in your income
it means this time around you will want
to switch your pet assessed to a more
preferred commodity or to a normal wood
which is the same meat in our case if
you invited me it means you will reduce
your palaces of capital that means that
this means that when your income is high
you will demand less of the inferior
good and therefore the demand curve will
shift down and to the left the other
determinant that we can look at is the
price of related goods now when looking
at the effect of the price of related
goods with distinguish between the
substitute goods for example marina and
funda as well as the complement Goods
where we can take the case of bread and
butter now let's first start by looking
at the substitute goods
Rinda and fund suppose that the price
the price the Fanta price has gone up it
means that the quantity demanded for
Fanta potting other factors constant and
following the law of demand the quantity
demanded for Fanta will reduce because
the higher the price the lower the
quantity demanded so if the price of
further goes up as a consumer you will
reduce your Hannity demanded 4/5 which
means that if the price of morinda is
constant and because mirinda is a
substitute good you will buy more of
marina this means that the demand for
marina will increase as a result of the
increase in the price of funda in other
words there is a direct relationship
between the quantity demanded of a given
good and the price of its substitute
good graphically with price on the
vertical axis and quantity demanded on
the horizontal axis and our initial
demand curve d1 an increase in the price
of father will increase the demand for
marina and therefore the demand curve
for Marina will shift out and to the
right
conversely the decrease in the demand
for I mean in the price for father will
cause the quantity demanded of father to
increase and as a result we will notice
that people will start shifting away
from marina to buying more of father so
this means that the in the reduction in
the price of father has caused a
decrease in the demand for marina and
with our initial demand curve d1 then a
decrease in the demand from Brenda will
be displayed by a shift in the demand
curve down and to the left okay so the
other determinant that you look at is
the test so a favorable change in
consumers tests or preferences for a
product means that more of it will be
demanded at each price this is because
this is this means that a change which
is favorable to the
will cause the demand to increase and
the change which is less favorable we
will cause the demand to reduce so
consider say maybe the invention of the
introduction of new phones for example
and the consumer develops a high test
for such a product it means that with
the price on the vertical axis and
quantity demanded on the horizontal axis
and our initial demand curve t1 the
increase in tests for a product will
cause the consumer to demand more of it
and therefore the demand curve will
shift out and to the right to d2 if the
consumer on the other hand loses
interest in a given commodity maybe
because it has it has gone out of
fashion it means that then the demand
for the consumer will shift down and to
the left because the demand for it will
reduce and the consumer will shift
interest to other commodities we also
have expectations as the determinants of
demand
now with expectations your expectations
about the future may affect your demand
for a good or service today suppose you
expect that the price of say Fanta maybe
they say the price of minimu will
increase tomorrow you are likely to buy
more today to avoid the high price which
will be approached more therefore
because the price of the commodity will
increase tomorrow your behavior is to
demand more today and therefore the
demand
Cave will increase which means that your
demand curve will shift to the right
because your your demand has increased
so graphically with our initial demand
curve d1 because you expect the price of
Mineo to be high tomorrow today your
demand for mini-me will be high and
therefore the demand curve will shift
out and to the right and if you expect
the price of mini meal to reduce
tomorrow it means that your demand today
will reduce because you want to buy a
commodity at a cheaper price tomorrow
and therefore the demand curve will
shift down and to the left today now I
like looking at this a classic case
where you have to be what go and buy
commodities which would be on promotion
car tomorrow think about the situation
that you go through suppose separate
announced that we are not we are going
to reduce the prices of a given
commodity on Black Friday
people today their behavior will be that
they will reduce the purchases or the
demand for those items and then on the
Black Friday they will buy more of it
and I'm sure you have witnessed the
Stampede that you are will be at the
shop right entrance those this is
because consumers are rational and
therefore they want to get the best out
of whatever resources they have lastly
let's look at that if one last
determinant which is the number of
buyers so the number of buyers if we
have an increase in the new beds for
example of say new beds of Unipol
babies it means that the demand for
diapers baby lotion and under five our
tonic services will increase and
therefore it means that because we are
in our new babies the buyers who are the
mothers will be more and therefore
because the number of buyers has
increased the demand for product will
also increase graphically with our
initial demand curve d1 if we have an
increase in the number of buyers that
demand for a product increases and
therefore the demand curve shifts out
and to the right and for a decrease in
the number of buyers with our demand
curve t1 the demand game will shift down
and to the left okay so that is it about
the determinants of demand let's now
look at the demand function now we note
that demand for a product is a function
of its own price the price of related
Goods the income of consumers the test
the population the expectation and other
factors including the own price so now
when we want to plot the demand curve we
will have the odd price as the only
determinant of demand now when we bring
this on a function to include all these
it means that then quantity demanded
will be a function of these factors that
were denoted here now this shows that
when we are plotting the demand curve
then we wrote all these other factors
constant we keep them constant and only
focus on the effect of price on the
quantity demanded and that means that
then our quantity demanded becomes the
function of price so the demand curve is
drawn by holding all other factors
constant
and only focus on the defect of price
okay so let's now look at the market
that's the market demand so the market
is made up of several consumers and
these consumers have different
preferences how different income levels
have different tests and so on therefore
it means that if we assume only two
households that is household a and house
would be and that we want to see the
effect of their behavior on the market
with the item let's assume that
individual air demands the three units
when the price is four and four units
when the price is three and the consumer
amid house would be demands four units
when the price is four and the six units
when the price is three then the market
demand will be the horizontal summation
of these individual household demands
that means in the market at the price
for for the market that quantity
demanded will be seven which will be 3
plus 4 and when the price reduces to 3
the market demand increases to 10 which
is a 4 for house of a and 6 for
household B therefore the market demand
is simply the horizontal summation of
individual demands okay so thank you
very much for watching if you have
questions please send an email to my
Alliance at gmail.com I will see you in
the next session where we will look at
the supply side of the market
bye bye
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