Supply and Demand Terminology

Summary

This video script clarifies the distinction between changes in demand versus quantity demanded, and changes in supply versus quantity supplied in economic terms. It explains that a change in demand or supply shifts the entire curve due to factors like income or technology, while a change in quantity demanded or supplied is a movement along the curve due to price changes. The script uses graphical models to illustrate these concepts, emphasizing the importance of understanding the terminology to avoid confusion.

Takeaways

• 😅 Economists use the terms 'change in demand' and 'change in quantity demanded' differently, which can be confusing.
• 📈 A 'change in demand' refers to a shift in the entire demand curve, caused by factors like income, population, or prices of related goods.
• 🛒 'Change in quantity demanded' is a movement along the same demand curve due to a change in the good's own price.
• 📊 Demonstrating an increase in demand graphically shifts the demand curve to the right or up, leading to higher prices and quantities exchanged.
• 📉 When supply increases, it results in an increase in the quantity demanded, shown as a movement along the demand curve from QE1 to QE2.
• 🔄 The difference between 'change in supply' and 'change in quantity supplied' is similar to that between demand changes and quantity demanded changes.
• 🔧 A 'change in supply' is a shift of the entire supply curve, triggered by factors like changes in technology or input prices.
• 🔄 'Change in quantity supplied' is a movement along the supply curve due to a change in price, not a shift of the supply curve itself.
• 📉 Graphically, an increase in supply shifts the supply curve to the right and down, leading to lower prices and increased quantities traded.
• 🔑 Understanding these concepts and following the curves helps to avoid confusion regarding economic terminology.

Q & A

What is the difference between a change in demand and a change in the quantity demanded?

A change in demand refers to a shift in the entire demand curve, which can be caused by factors such as income, population, or changes in the prices of substitutes and compliments. A change in the quantity demanded refers to a movement along a fixed demand curve, which is caused by a change in the price of the good itself.

What causes a shift in the demand curve?

A shift in the demand curve is caused by changes in factors known as 'shifters,' which include income, population, prices of related goods (substitutes and compliments), and other external factors that affect the overall desire for a product.

How does an increase in demand affect the market price and quantity?

An increase in demand shifts the demand curve to the right or up, leading to a higher market price and an increase in the quantity exchanged.

What is the difference between a change in supply and a change in the quantity supplied?

A change in supply refers to a shift in the entire supply curve, which can be caused by changes in costs such as technology or input prices. A change in the quantity supplied refers to a movement along a fixed supply curve, which is caused by a change in the price of the good.

What causes a shift in the supply curve?

A shift in the supply curve is caused by changes in the underlying costs of production, such as improvements in technology, changes in input prices, or other factors that affect the cost of producing a good.

How does an increase in supply affect the market price and quantity?

An increase in supply shifts the supply curve to the right, resulting in a lower market price and an increase in the quantity bought and sold.

What is the relationship between a change in demand and a change in the quantity supplied?

A change in demand can lead to a change in the quantity supplied, but not a change in the supply itself. For example, an increase in demand will increase the quantity supplied along a fixed supply curve without shifting the supply curve.

Can you provide an example of a shifter that would cause an increase in demand?

An example of a shifter that could cause an increase in demand is an increase in income, especially for normal goods, where consumers can afford to buy more as their income rises.

What is the impact of a decrease in the price of a substitute good on the demand for a product?

A decrease in the price of a substitute good typically leads to a decrease in demand for the original product, as consumers switch to the cheaper substitute.

How does an increase in the price of a complement good affect the demand for a related product?

An increase in the price of a complement good typically decreases the demand for the related product, as consumers buy less of the complement, which in turn reduces the need for the related product.

What is the economic term for the point where the supply and demand curves intersect?

The point where the supply and demand curves intersect is called the equilibrium, which represents the market-clearing price and quantity where the quantity supplied equals the quantity demanded.