>> All right, so you should have
by now gotten a good
understanding
of how demand is set up to look.
But what we're doing right
now is that we're going
to start talking about how
to move demand or
how demand shifts.
What we have to have are changes
in non-price determinants.
Remember, the changes
in non-price determinants
are what happens
when we release ceteris paribus.
We're not forcing
everything to stay fixed.
One of the classic
ones that we talked
about last time was
the number of buyers.
When the number of
buyers in a market grows,
our demand curve
shifts to the right.
So imagine if you will, that
the U.S. takes over Canada.
Then the market for U.S. corn,
the demand, will increase,
because all of those Canadians
will be wanting to buy corn.
Similarly, it can work
the other direction, too.
Imagine if you will, that
for some reason Texas decides
to secede from the Union.
They become their own country.
That wouldn't suck, would it?
But if they do, what happens
to the U.S. demand for corn?
The demand curve
shifts to the left.
So when we have a
decrease in demand,
the demand curve
shifts to the left.
When we have an increase in
demand, it shifts to the right.
The basic format doesn't
change the shape of the curve,
but where its position
moves right or left
when these non-price
determinants change.
All right, so let's look at
the next non-price determinant
that I have up here --
tastes and preferences.
And in parentheses
I've got the word ads.
That's advertising,
is what it is.
When companies advertise to
us, when Pepsi tries to tell us
that it's a wonderful soda
and we should all drink it,
what they're trying
to do is to tell us,
we should want more Pepsi, or
let's shift the demand curve
to the right -- increase demand.
And again, it can also work
in the negative mode as well.
Think of all of those iPhone
application advertisements,
or the 3G networks, Verizon
and whatnot, those guys trying
to tell you that the
competitor is bad.
What they're trying to
do there is to say, hey,
we're advertising so that you
demand their product less.
Their products demand decreases
while maybe yours increases.
So again, decrease in
demand, shift to the left,
increase in demand,
shift to the right.
What about our next one?
Income. When you start making
more money, generally speaking,
you demand goods more.
Corn is what we call
a normal good.
When your income rises,
so in a normal good,
when your income rises,
your demand for that
particular good goes up.
Demand increases and
it shifts to the right.
But now think about
other types of goods.
Think about inferior goods,
like say maybe Grade C beef.
That would be an inferior
good, or generic goods.
When your income goes
up, are you going
to buy more generic goods?
Uhn-uhn. In fact, what you're
going to do is you're going
to start buying less, because
what you're going to do is
to start buying the name brands.
So here's the first shift
in the way things work.
There's actually an inverse
relationship between the income
and your inferior goods.
When income goes up and
demand goes up for normal
but for inferior, when
your income rises,
your demand for it
will actually decrease.
It'll shift to the left.
That's the difference between
normal and inferior goods.
All right, now, the last
thing that we want to talk
about is a non-price
determinant,
or prices of related goods.
So think of another good
that's related to corn;
let's say something like beans.
Now, you are an economist
measuring the corn market.
All you care about
is the corn market,
and normally, ceteris paribus.
That means you're
keeping bean prices fixed.
Now we release that and we
say, the price of beans rises.
And what are beans to corn?
Beans and corn are substitutes.
If you're not going to eat
corn, you're going to eat beans.
Well, if the price of beans
goes up, so one of the things
that you could substitute
for corn; its price rises,
guess what happens to
your demand for corn?
You're going to want more of it,
because it's cheaper than beans;
therefore, your demand
actually increases.
So if the price of
beans goes up,
your demand for corn
will increase.
Now, let's look at
the converse of that.
What happens if the
price of beans falls?
We'll switch colors for that.
So now we're looking at
the price of beans falling.
Since beans are cheaper, you're
probably going to buy more beans
than you are corn,
and what happens is is
that your corn demand
actually shifts to the left.
So here's where you see
one of those weird cases
where the price of a
substitute good, if it rises,
your demand for the other good,
not for beans, but for corn,
will actually increase;
whereas if the price
of your substitute falls,
you're going to start buying
that substitute, and so the
demand for corn will go down.
Now, what about complements?
So a complement for corn, what
would be a complement for corn?
Well, what do you put
on corn on the cob?
Butter, right?
Suppose the price
of butter rises.
If the price of butter rises,
this is a complementary
good -- they go together.
If it costs you more
to buy butter --
normally you're going to buy
corn and butter together;
now when you buy corn
and butter together,
it's going to be more expensive.
Therefore, you're going to buy
less corn because the butter
that you always put on
your corn costs you more.
So you're going to have
to buy less corn to make
up for the fact that this
price of butter has increased.
So it actually works
the opposite direction.
When the price of butter
rises, a complement --
remember that this
is a complement --
your demand will
actually decrease.
Another one of those
inverse relationships;
the price of this
complement increases,
your demand decreases.
And then similarly, as
beans, if the price falls,
the price of your complement
falls; in other words,
it's cheaper to go out and
buy corn and butter together,
your demand will actually
increase for corn.
All right, so there's
a quick introduction
to non-price determinants
and how they shift demand.
