Demand and Supply Part 1

Summary

This 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

• 📚 Unit 5 focuses on the demand side of the market, aiming to build a comprehensive understanding of market structure from the consumer's perspective.
• 🔍 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.
• 📈 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.
• 🏷️ 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.
• 📉 The determinants of demand are explored, including consumer income, prices of related goods, consumer tastes and preferences, expectations, and the number of buyers.
• 💰 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.
• 🍔 The price of substitute goods influences demand; an increase in the price of one substitute good typically increases demand for its alternatives.
• 📊 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.
• 👶 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.
• 🌐 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

00:00

📈 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.

05:00

📊 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.

10:00

💰 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.

15:01

🔄 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.

20:04

🛒 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.

25:06

📧 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.

Keywords

💡Demand

Demand refers to the quantity of a product that consumers are willing and able to purchase at various prices during a given period. It is a fundamental concept in economics that underpins the study of market behavior. In the video, demand is defined with an emphasis on the series of prices and the specified time period, highlighting the dynamic nature of consumer purchasing decisions.

💡Law of Demand

The Law of Demand states that, all else being equal, an increase in the price of a product will lead to a decrease in the quantity demanded, and vice versa. This law is central to the video's discussion, illustrating the inverse relationship between price and quantity demanded. It is exemplified through the script's explanation of how higher prices typically result in lower quantities demanded by consumers.

💡Demand Schedule

A demand schedule is a table that lists the quantities of a product that consumers are willing to buy at different prices. The video uses the demand schedule to transition from a theoretical discussion to a practical tool for understanding consumer behavior. It is mentioned as a precursor to the graphical representation of demand.

💡Demand Curve

The demand curve is a graphical representation that shows the relationship between the price of a good and the quantity demanded by consumers. It is derived from the demand schedule and is crucial for visualizing the Law of Demand. The video describes how the curve slopes downward, indicating that higher prices correspond to lower quantities demanded.

💡Determinants of Demand

Determinants of demand are the various factors that influence the quantity demanded of a product. The video discusses several determinants, including consumer income, prices of related goods, consumer tastes and preferences, expectations, and the number of buyers. These determinants are integral to understanding shifts in the demand curve and how they reflect changes in consumer behavior.

💡Quantity Demanded

Quantity demanded refers to the specific amount of a product that consumers are willing and able to purchase at a given price. The video distinguishes between demand and quantity demanded, emphasizing that while demand is a broader concept, quantity demanded is the actual amount that corresponds to a particular price point on the demand curve.

💡Normal Goods

Normal goods are products for which the demand increases when consumer income rises and decreases when income falls. In the video, normal goods are contrasted with inferior goods, using meat as an example of a normal good whose demand increases with higher income, illustrating the income effect on demand.

💡Inferior Goods

Inferior goods are those for which the demand decreases as consumer income increases. The video uses kapenta (a type of fish) as an example of an inferior good, explaining that as income rises, consumers tend to buy more meat and less kapenta, demonstrating the income effect on the demand for inferior goods.

💡Substitute Goods

Substitute goods are products that can be used in place of one another. The video explains how an increase in the price of one substitute good (like Fanta) leads to a decrease in its quantity demanded and an increase in the demand for its substitute (like Mirinda), illustrating the direct relationship between the prices of substitutes and their respective demands.

💡Complementary Goods

Complementary goods are products that are used together. Although not explicitly detailed in the script, complementary goods would be relevant in the context of discussing how a change in the price of one good (like bread) affects the demand for another, related good (like butter), which is a concept closely tied to the determinants of demand.

💡Ceteris Paribus

Ceteris paribus, or 'all else being equal,' is an assumption used in economic analysis to isolate the impact of one variable while holding others constant. The video employs this concept to focus on the relationship between price and quantity demanded without the interference of other factors, which is essential for understanding the Law of Demand.

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