>> Hello, this is Marshall Mudd
here, and I'm going to talk
to you today in this
video about demand.
So let's start with
the law of demand.
Basically the law
of demand states
that there is an inverse
relationship between price
and quantity of a
good that's being sold
with this caveat
of ceteris paribus.
Ceteris paribus, as you
remember from chapters 1 and 2,
simply means that all other
things being held constant.
That's a rule we need
to apply to make sure
that we can just compare price
and quantity without having
to worry about all
the other side effects
that might be affecting
what's going on in the market.
So what does inverse
relationship mean?
Inverse relationship
basically states
that when the price goes
up, quantity goes down.
So if we were to look at a
graph of price and quantity,
price and quantity --
and do realize that these
are the standard axes labels
when you're dealing
with economic markets.
Here is what a demand
curve looks like.
So it's an inverse relationship.
It's decreasing.
As price goes up,
quantity will go down.
If the price is currently
set right here, what's going
to happen is that the amount
that we are going to buy,
or the amount that we are going
to demand, shoot the price
over 'til it intercepts the
demand curve, go down to find
out where it hits the quantity.
This will be the price, and
quantity that will be purchased
in this market, assuming
the price was set here.
If the price goes up, naturally,
the quantity should go down,
and you can see that by
shooting the price over to
where it hits the curve
and coming down to see
where the quantity is
going to be changed to.
All right, this is
our basic model
for what demand looks like.
Now, what we have to worry
about is how do things
move along this curve?
This, when price goes
up, when price rises,
this is what's known
as creating a change
in the quantity demanded.
So when the price of -- in
this case let's suppose we were
working in the corn market,
classic economic market to work
with -- if the price of
corn rises, the quantity
that we demand will fall from
this value to this value.
That's a change in
quantity demanded.
Now, when we're dealing
with these graphs,
one of the other things
that we have to worry
about is not just a change
in the quantity demanded,
but natural change in demand.
So what's going to change
the actual demand curve
or make this demand curve move
-- that is a change in demand.
So let's take a look
at that really fast.
So here we have our standard
price and quantity demand curve.
And I will always abbreviate P
and Q for price and quantity,
just so that you know;
similarly with my demand curve.
Now, what makes a change in
demand, a change in demand.
And this is different than a
change in quantity demanded.
This is where ceteris
paribus is released.
We allow some other
factor to change.
And there are certain set
of factors that are going
to change what our demand is.
One of the classic ones
is the number of people
who are buying a
particular good.
If you think about it, this
might be my demand curve
for what I demand corn, how
much corn I demand given a
certain price.
If we add additional people to
the corn market who are going
to buy corn -- so imagine
that all of you are going
to start going out and buying
corn, which I'm sure you do --
what happens to the curve is
that it actually
shifts entirely.
So the market represents this
additional buyers as a shift
in the demand curve,
and it actually moves the
demand curve to the right.
That's a key point that we have
to deal with when we're working
with economics, is the
difference between a change
in a demand and a change
in quantity demanded.
This tends to confuse
students, because it looks
like those are the same thing.
Changes in demand are when
we change ceteris paribus;
changes in quantity
demand are simply,
is simply a change
in the actual price.
