Recording-2025-09-09T14:21:54.332Z

Demand and Supply: Key Concepts, Shifters, and Examples

Demand is the quantity of a good that buyers are willing and able to purchase at various prices, holding other factors constant.
Movement along the demand curve (change in quantity demanded) occurs when the price of the good itself changes. The price change causes a movement to a different point on the same demand curve.
- This is a change in quantity demanded, not a change in the demand itself.
- In the transcript: changing the price of hotdogs/hamburgers leads to a movement along the demand curve.
A shift of the demand curve (change in demand) occurs when a non-price factor causes the quantity demanded to change at every price.
Horizontal interpretation of shifts:
- A shift to the right indicates an increase in demand at every price.
- Memorize: right = increase; left = decrease.
Five main demand shifters (as introduced in the transcript):
- Income
- Prices of related goods (substitutes and complements)
- Tastes and preferences
- Expectations about future prices or income
- Number of buyers in the market

Normal goods: demand increases when income increases.
- Example from transcript: pizza is a normal good, so higher income → higher demand for pizza.
Inferior goods: demand decreases when income increases.
- Example from transcript: pasta is an inferior good, so higher income → lower demand for pasta.

Substitutes: an increase in the price of one good tends to increase the demand for its substitute (consumers switch to the cheaper alternative).
Complements: two goods that are often used together. A decrease in the price of one good tends to increase the demand for its complement; an increase in the price of one good tends to decrease the demand for its complement.
- Transcript example: hamburgers and hamburger buns are complements. If fewer buns are bought (e.g., due to higher bun prices), fewer hamburgers are bought as well; thus a decrease in the other good’s demand occurs when the complement’s price rises.
- The converse (a fall in bun price) would increase demand for hamburgers.

Expectations about future prices or future income affect current demand.
- If consumers expect prices to rise in the future, they buy more now (in the transcript, price expectations push current demand up).
- If consumers expect their income to rise in the future, they buy more now.
The transcript also notes that the demand response depends on storage/holding costs and the ability to store goods.

Mango juice example: a shift to the right represents an increase in demand; the price may adjust along the new demand curve depending on the interaction with the supply curve.
It is possible to observe a movement along the demand curve (price-driven) or a shift of the entire demand curve (non-price factors).