Supply and Demand Practice
Summary
TLDRIn 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
- π The demand curve is downward-sloping, indicating an inverse relationship between price and quantity demanded (Law of Demand).
- π The supply curve is upward-sloping, showing a direct relationship between price and quantity supplied (Law of Supply).
- βοΈ Equilibrium is the market-clearing price where quantity demanded equals quantity supplied.
- π If the price is too low, a shortage occurs, leading to an increase in price towards equilibrium.
- π If the price is too high, a surplus occurs, causing the price to decrease towards equilibrium.
- π Price changes do not shift the demand or supply curves; only changes in other factors can cause the curves to shift.
- π Shifts in demand or supply curves can be to the right (increase) or left (decrease), affecting equilibrium price and quantity.
- ποΈ Changes in tastes and preferences can cause the demand curve to shift, affecting the market equilibrium.
- πΈ Government subsidies can increase supply by lowering production costs, shifting the supply curve to the right.
- π Real-world market dynamics, such as changes in demand and supply for fidget spinners, can be analyzed using these principles.
- π 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
π 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.
π 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.
π 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.
Mindmap
Keywords
π‘Economics
π‘Supply and Demand
π‘Law of Demand
π‘Law of Supply
π‘Equilibrium
π‘Shifters
π‘Substitutes
π‘Complements
π‘Price Ceiling
π‘Price Floor
π‘Scarcity
π‘Practice Questions
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
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