Supply and Demand Practice

Summary

In this educational video, Jacob Clifford offers a rapid-fire overview of supply and demand, focusing on practical application rather than theoretical teaching. He explains the law of demand and supply, demonstrating how changes in price affect quantity demanded and supplied. The video then delves into scenarios involving fidget spinners, guiding viewers to analyze shifts in demand and supply, and their impact on price and quantity. Clifford emphasizes the importance of understanding these concepts for economic studies, encouraging practice and re-watching for clarity.

Takeaways

• 📈 The demand curve is downward-sloping, indicating an inverse relationship between price and quantity demanded (Law of Demand).
• 📉 The supply curve is upward-sloping, showing a direct relationship between price and quantity supplied (Law of Supply).
• ⚖️ Equilibrium is the market-clearing price where quantity demanded equals quantity supplied.
• 📉 If the price is too low, a shortage occurs, leading to an increase in price towards equilibrium.
• 📈 If the price is too high, a surplus occurs, causing the price to decrease towards equilibrium.
• 🔄 Price changes do not shift the demand or supply curves; only changes in other factors can cause the curves to shift.
• 📊 Shifts in demand or supply curves can be to the right (increase) or left (decrease), affecting equilibrium price and quantity.
• 🛍️ Changes in tastes and preferences can cause the demand curve to shift, affecting the market equilibrium.
• 💸 Government subsidies can increase supply by lowering production costs, shifting the supply curve to the right.
• 🌐 Real-world market dynamics, such as changes in demand and supply for fidget spinners, can be analyzed using these principles.
• 🔄 Double shifts in both demand and supply can result in indeterminate price changes, but quantity will always change.

Q & A

What is the primary focus of Jacob Clifford's video on supply and demand?

The primary focus of Jacob Clifford's video is to provide a fast overview of supply and demand concepts and then jump into practice scenarios, emphasizing the application of these concepts rather than teaching them in detail.

What is the law of demand as explained in the video?

The law of demand is the concept that there is an inverse relationship between price and the quantity demanded, meaning that as the price falls, the quantity demanded goes up, and vice versa.

How does the law of supply relate to the price and quantity supplied?

The law of supply states that there is a direct relationship between price and the quantity supplied. As the price increases, producers are incentivized to produce more, and as the price decreases, they produce less.

What is meant by 'equilibrium' in the context of supply and demand?

Equilibrium refers to the market-clearing price where the quantity demanded equals the quantity supplied. It is the point where the supply and demand curves intersect.

What happens in a market when the price is too low?

When the price is too low, the quantity demanded increases and the quantity supplied decreases, leading to a shortage. This is a state of disequilibrium.

What is a 'surplus' in the context of supply and demand?

A surplus occurs when the price is too high, resulting in a decrease in quantity demanded and an increase in quantity supplied, leading to more units being produced than people want to buy.

How does a change in price affect the demand and supply curves?

A change in price does not shift the demand or supply curves. Instead, it moves along the curves, changing the quantity demanded or supplied without altering the curves' positions.

What is the difference between a shift in demand and a shift in supply?

A shift in demand or supply refers to a change in the curve's position due to factors other than price. A shift to the right indicates an increase, and a shift to the left indicates a decrease. For demand, a rightward shift signifies increased demand, and for supply, it signifies increased supply.

What are the five shifters of demand and supply mentioned in the video?

While the video does not explicitly list the five shifters, it mentions factors such as taste and preferences, resource costs, substitutes, income, and government subsidies as examples of shifters that affect demand and supply.

How does the video suggest practicing understanding of supply and demand shifts?

The video suggests practicing by drawing graphs and analyzing how changes in demand or supply affect the equilibrium price and quantity. It emphasizes understanding the direction of shifts and their impact on price and quantity.

What is the significance of understanding the difference between a normal good and an inferior good in the context of supply and demand?

Understanding the difference is significant because it affects how demand responds to changes in income. For a normal good, demand decreases when income falls, while for an inferior good, demand increases with lower incomes.

How does the video explain the real-life application of supply and demand with the example of fidget spinners?

The video uses fidget spinners to illustrate how an increase in demand can lead to a rapid increase in supply, which can affect the price and quantity in the market. It shows how the initial surge in demand was met with an increase in production, preventing a significant price increase.

Outlines

00:00

📈 Introduction to Supply and Demand

Jacob Clifford introduces a video aimed at practicing supply and demand concepts for economics students. He clarifies that the video is not intended to teach the basics of supply and demand but rather to focus on applying these concepts. Clifford provides a quick overview of the demand curve, which slopes downward indicating an inverse relationship between price and quantity demanded (the law of demand). He then explains the supply curve, which slopes upward showing a direct relationship between price and quantity supplied (the law of supply). The equilibrium point is where the market clears at the price where quantity demanded equals quantity supplied. Clifford discusses market disequilibrium scenarios, such as shortages when prices are too low and surpluses when prices are too high. He emphasizes that changes in price do not shift the demand or supply curves, but changes in other factors do. He introduces the concept of shifters for both demand and supply and encourages viewers to practice drawing graphs to understand how equilibrium price and quantity change.

05:01

📚 Practice Scenarios for Supply and Demand

The video script transitions into practice scenarios focusing on the supply and demand for fidget spinners. Each scenario presents a different economic factor affecting the market for fidget spinners, such as changes in consumer preferences, cost of production inputs, availability of substitutes, and government subsidies. Clifford guides viewers through determining the impact on demand, supply, price, and quantity for each scenario. He stresses the importance of understanding whether a change affects buyers or producers and how to correctly interpret shifts in the demand and supply curves. The scenarios include a mix of single and double shifts in demand and supply, leading to indeterminate outcomes for price or quantity in some cases. Clifford encourages viewers to practice these scenarios to solidify their understanding of how economic factors influence market dynamics.

10:01

🎓 Real-life Application and Conclusion

In the final paragraph, Clifford relates the theoretical concepts back to real-life events, specifically the popularity of fidget spinners. He notes how an increase in demand was met with an increase in supply, preventing significant price increases. He suggests that the supply may have even increased beyond the initial demand spike, leading to very low prices for fidget spinners. Clifford invites viewers to comment on the video's helpfulness and requests suggestions for future practice videos. He concludes by encouraging viewers to subscribe and engage with the content, emphasizing the practical relevance of the economic concepts discussed.

Keywords

💡Economics

Economics is the social science that studies the production, distribution, and consumption of goods and services. In the video, the speaker assumes the audience is enrolled in an economics class, indicating that the content is tailored to students who are learning about economic principles.

💡Supply and Demand

Supply and Demand are fundamental economic concepts that describe the relationship between the quantity of a good that producers wish to sell and the quantity that consumers wish to buy at each price level. The video provides a fast overview of these concepts, explaining how changes in price affect the quantity demanded and supplied.

💡Law of Demand

The Law of Demand states that, all else being equal, as the price of a good increases, the quantity demanded decreases, and vice versa. This is illustrated in the video with the downward-sloping demand curve, where a decrease in price leads to an increase in quantity demanded.

💡Law of Supply

The Law of Supply indicates that, all else being equal, as the price of a good increases, the quantity supplied increases, and as the price decreases, the quantity supplied decreases. This is represented by the upward-sloping supply curve in the video, showing the direct relationship between price and quantity supplied.

💡Equilibrium

Equilibrium in economics refers to a stable state where the quantity demanded of a good equals the quantity supplied, resulting in a market-clearing price. The video explains that equilibrium is achieved when the demand and supply curves intersect, and it is a key concept for understanding market dynamics.

💡Shifters

Shifters are factors that cause the demand or supply curve to shift from its original position. The video mentions five shifters of demand and five shifters of supply, which can affect the market equilibrium. Understanding shifters is crucial for predicting changes in market prices and quantities.

💡Substitutes

Substitutes are goods that can be used in place of one another. In the context of the video, fidget cubes are mentioned as substitutes for fidget spinners. When the price of a substitute decreases, it can lead to a decrease in demand for the original product, as consumers may switch to the cheaper alternative.

💡Complements

Complements are goods that are used together. The video provides a scenario where a decrease in the price of a complementary product would increase the demand for fidget spinners, as consumers would buy more of both products when they are used in conjunction.

💡Price Ceiling

A price ceiling is a maximum price set by the government. The video does not explicitly mention price ceilings, but the concept is relevant to understanding how government interventions can affect supply and demand. If a price ceiling is set below the equilibrium price, it can lead to shortages.

💡Price Floor

A price floor is a minimum price set by the government. Similar to price ceilings, price floors are not directly mentioned in the video but are important for understanding market interventions. If a price floor is set above the equilibrium price, it can lead to surpluses.

💡Scarcity

Scarcity refers to the limited availability of resources relative to the wants and needs of society. The concept of scarcity is implicit in the video's discussion of shortages and surpluses, as it relates to the imbalance between supply and demand.

💡Practice Questions

The video script includes practice questions that are designed to help viewers apply their understanding of supply and demand to various scenarios involving fidget spinners. These questions are meant to reinforce learning and provide practical examples of how economic principles work in real-world situations.

Highlights

Fast overview of supply and demand

Demand curve is downward-sloping

Law of demand: inverse relationship between price and quantity demanded

Supply curve goes up, indicating direct relationship between price and quantity supplied

Law of supply: producers produce more when prices are high

Equilibrium is the market clearing price where quantity demanded equals quantity supplied

Market disequilibrium occurs with shortages or surpluses

Price changes do not shift the demand or supply curves

Non-price changes cause the curves to shift

Five shifters of demand and five shifters of supply

How to draw graphs to show changes in price and quantity

Only four possible shifts in supply and demand

Graphs can predict price and quantity changes

Practice questions about fidget spinners

Scenario analysis for supply and demand shifts

Double shifts in supply and demand

Real-life example of fidget spinners' market dynamics

Encouragement to leave comments for further practice video suggestions

Transcripts

hey Internet this is Jacob Clifford now

I'm assuming you're currently enrolled

in a economics class so you're watching

this video to practice and that's what

it's all about this is not designed to

teach you supply and demand I have other

videos that can help you go over more

details or go slower I'm just gonna give

you a really fast overview of supply and

demand and then we're gonna jump into

the practice we're gonna spend more the

time on making sure you know how to use

supply and demand as opposed to teaching

you supply know min so keep that in mind

and here we go so as already learned in

class the demand curve is

downward-sloping and you can see when

the price falls the quantity demanded

goes up and that shows you the law of

demand there's an inverse relationship

between price in the quantity demanded

which totally makes sense the price

Falls people buy more when the price

goes up people buy less and of course

there's also a supply curve that goes up

right supply to the sky you can see when

the price falls the Quine supplied goes

down why because when the price falls

producers have less time to produce

stuff so they produce less and the price

goes up producers produce more that's

called the law of supply there's a

direct relationship between price and

the quantity supplied now when you take

the demand curve and put it together

with the supply curve you get

equilibrium which is the market clearing

price that's the exact spot where the

client Amanda equals the client supplied

at that exact price okay so equilibrium

boom right there now the markets in

disequilibrium for example if the price

is too low then the client of met it

would increase the client supplied would

decrease and there be a shortage

remember shortages are short right if

you think price is low its shortage if

the price is really high above

equilibrium then the client demanded

Falls right people don't really want to

buy it the clinic supplied would

increase and again we're not at

equilibrium we're at disequilibrium and

there's a surplus and there was more

units are being produced then people

want to actually buy keep in mind when

there's a change in price it doesn't

shift either the curves like demand or

the supply neither of them actually

shift so here's your first question what

happens to the demand for product if the

price falls right the price Falls what

happens the demand

well nothing remember the demand and the

supply they do not change only the

quantity demanded would change so if the

price goes down then the queendom added

would go up and the quantity supplied

would go down so the quantity changes

when there's a change the price not the

demand not the supply curve the curves

down shift but when there's a change of

something else other than

price of the actual product then the

curve does shift so the demand curve

shifting to the right as an increase in

the man shift to the left is a decrease

in demand and the same thing for supply

and right is an increase in supply left

is a decrease in supply okay there's

also five shifters of demand and five

shifters of supply but just knowing the

list of the shifters isn't enough you

have to be able to draw the graph and

show what happens to price in quantity

how does the equilibrium price and

quantity change for example I asked you

to draw market equilibrium you've got

demand supply equilibrium and let's say

the demand goes up I give you a scenario

and you figure out man goes up well

demand curve shifts to the right so that

old demand curve disappears and that

quantity equilibrium is no longer there

that's actually the quantity supplied

now and at that low price decline demand

it is right here so there's a shortage

and the shortage causes the price to go

up to that new equilibrium right so

prices will automatically adjust we

assume quickly so when there's a shift

that occurs just draw the demand curve

just to the right price and quantity go

up that's what you have to build a draw

and understand and although it seems

complicated it's actually not that hard

number there's only four things that can

happen the demand can decrease the man

can increase the supply can decrease or

the supply can increase only four

possible shifts can happen just look at

the graph right the best part of econ

class is you can cheat you draw the

graph the graph tells you what happens

the price in quantity look at the

original price in quantity and draw the

curve draw the shift label the new price

and quantity boom price changes quantity

changes I'll stop and I know I just went

really fast that whole thing but

remember this video is about reviewing

and practicing so I did not try to teach

you supply and demand right there I just

went way too fast and if you're totally

lost if you're like dude I have no idea

what he was talking about the whole idea

of the curve shifting or the idea of

moving along the curve and you're

totally lost then go back and re-watch

supply and demand videos I've already

made they give me more details or go

back and look at your notes but you're

not quite ready to practice if you're

totally lost at this point so right now

we're jumping to practice here we go

good luck so right here I have eight

practice questions or scenarios your job

is to figure out how much the demand the

supply the price and the quantity for

fidgets spinners so every single in

these scenarios is talking about the

supply and demand for digit spinners so

if you wanted to DRI graph each one of

these you could

and if I what's gonna happen to again

demand or supply and what happens to

price and quantity and that's the key

focus on what happens to the change in

price and quantity so here you go you're

on your own pause the video see if

you're getting it figured out this

demand or supply then I'll go over the

answers to all of them and we'll drop

the grass and you can check yourself

okay good luck for the first scenario

here it says that fittest bidder

significantly improved learning and

attention the classroom and they've

actually found out they don't but let's

say they do right so they make you more

intelligent a better student so what

would happen well the demand would

increase people would want to buy more

of these parents when I buy them for

their kids because they want the kids to

be smart so the demand curve was shift

to the right

causing the price to go up and the

quantity go up so there's your right

answer that's the graph you're looking

for now if you thought well producers

would realize they should make more

because people want more that's a

different concept right you're trying to

do like the next level down the road the

first shift is we're asking what happens

what's the first thing that shifts this

is definitely the man shifter and the

shifter was taste and preferences people

prefer that their children are smarter

scenario number two we're talking about

a supply shift right the bearings that

are a key resource to producing finches

spinners now are more expensive so if

they're more expensive that means you

cannot produce as many fidgets spinners

that need those bearings so supply curve

would shift to the left

causing the price to go up and the

quantity to decrease now keep in mind a

decrease in supply is always to the left

a lot of times students want to go oh a

decrease a decrease in supply don't do

that right that's the class mistake

don't do it increase is always to the

right for both demand and supply a

decrease is always to the left for both

demand and supply in this case supply

shifted to the left price goes up

quantity goes down for number three

we're talking about a substitute in this

case fidget cues right now 50 spinners

but fidget cubes their price is cheaper

so it's really cheap that cost you know

three cents to go get a fidget cube so

people going to buy less fidget spinners

because there are substitutes for each

other so the demands gonna fall price

and quantity both go down there's your

graph now when you're doing these

questions keep in mind that you have to

ask yourself is it effect buyers or

producers right if you keep that in mind

mix is really easy in this scenario the

price of fidget cubes decreases that's

gonna affect buyers buyers are gonna

react first to that that's why it's a

decrease in demand now number four I'm

trying to be tricky here the price

fell for fidget spinners in the last two

questions prices change but they weren't

the price the product right in Scenario

- the price of bearings increased right

so that's a different resource that's

not the product randomizing that's a

resource of the product or analyzing and

in scenario three it was the price of

fidget cubes a different product but in

scenario for if the price of the actual

product that were analyzing so if the

price decreases that is not going to

shift the curve there is no shift the

client demanded would go up the quantity

supplied would go down and we'd have a

shortage we'd be a disequilibrium so

there it is price down quantity would

fall technically because the quantity

supplied is the only amount that's

actually bought and sold so the client

supply is the new quantity so we

disequilibrium price went down quantity

went down the number five the government

provided a subsidy for these fidgets

spinners I'm not sure why but they did

and that means that it's going to

increase the supply of subsidy is when

the government gives money to producers

to produce more stuff remember it's the

opposite of attacks so supply curve

shifts to the right price goes down and

the quantity goes up there's the graph

did you get it number six it talks about

income and a recession those are demand

shifters right because income is a

shifter of demand in this case it's

normal good fidget spinners or a normal

good which means when incomes fall

people buy less of them so the demand

Falls shifts to the left

price goes down quantity goes down

remember there's a difference between a

normal good and an inferior good and

inferior good is the opposite when

incomes fall people buy more of it so

like Top Ramen but that's not what's

going on here they told you in the

question it's a normal good now your

teacher on a test question will tell you

if something is substitute or a

compliment or if it's a normal good or

inferior good so keep in mind don't just

guess and if you have no clue and you're

looking at a question like what raise

your hand and call your teacher back

okay are these substitutes for each

other that compliments are they normal

good is an inferior good you shouldn't

have to guess on these it should tell

you in scenario 7 it says the price of a

complementary product decreases so it's

cheaper there's other product that you

would buy with fidgets spinners now

funny enough I couldn't think of a

complementary product like what do you

buy with the spinners like I don't know

but I gave you the scenario anyways the

answer is demand would increase right

price and quantity would go up why

because if the

thing that you would buy with the

disappeared spinners it's cheaper than

you would buy more those are kinda man

it would increase of those and then

you'd buy more fish burners as well

because you know these two things go

together and so the demand would

increase for the fidgets spinners in

scenario eight I'm trying to be really

tricky and this is a hard question

because it's a double shift if the

demand and the supply both increase now

of course you already know what it looks

like in the graph so just draw the graph

gives you the right answer demand shift

to the right right price would go up

quantity would go up we're not done

supply shift to the right so the price

would go down and the quantity would go

up we end up with a new scenario with a

new equilibrium right here now it looks

like the price is the same but it's not

the price is indeterminate in a term

that means you can't tell it might go up

it might go down it depends or it's

ambiguous the quantity no matter what's

gonna go up so it doesn't matter how you

drew this quantity goes up so the answer

the question well there's a double shift

is always either price or quantity

something is gonna be indeterminate I

made a video talking about double shifts

if you want to go practice more of this

but you should know how to do double

shifts when to curve shift at the same

time and by the way that's exactly what

happened in real life with fidget

spinners right when the demand increased

and you know last year vintage spinners

became a thing people are buying and

they're all excited about these things

and the demand went up and when the

demand goes up for something you'd

expect the price to go out and the

corner to go up but producers reacted

relatively quickly realize though

consumers one of the stuff and they

started making more of them and that

increases a pie so the price didn't

really go up a lot for fidget spinners

because producers produce a whole lot

more of them so this actual graph is the

real thing that happened in real life in

fact you could probably make an argument

now the supply has increased even

further to the point where now fidget

spinners are really really really cheap

because producers are producing so many

of them right because they're reacting

to that initial change in demand anyways

this stuff is real life and that's why

you're learning please do me a favor

leave a comment let me know if this

video is helpful and let me know what

concepts or ideas you want me to make

another practice video for okay thanks

again for watching please subscribe hit

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you rock until next time