Understanding Market Demand Video Lecture | Economics for JAMB

hi there this is a year one
microeconomics topic video covering
demand so what's a basic definition of
demand or demand for a good or service
is the amount that people are willing
and able to buy at a given price in a
given time put a key concept is
effective demand because only if the
demand for a product is actually backed
up by the willingness and an ability to
pay those demands become effective or
actual in the market the basic law of
demand is that demand in there varies
inversely with the price so for than the
market price makes a good or service
more affordable consumers an increase in
the price makes the product less
affordable so here is our basic demand
curve in this case it's the demand for
coffee relative to the price bias on the
y-axis the quantity demanded for coffee
on the x-axis the price goes up we see a
contraction of demand the price goes
down we see an expansion of demand key
revision point is that only changes in
market price caused a movement along the
demand curve now why does the demand
curve slope downwards for example when
the price goes down we need to make a
distinction between the income effect
and the substitution effect first the
income effect so if the price of a
product goes down for example if coffee
becomes cheaper a fall in the price
increases the real purchasing power of
consumers shipping they've got a given
budget per day or per week for their
coffee if the price goes down that
allows people to buy more coffee with a
given amount of income for normal Goods
demand goes up as income increases in
real terms the substitution effect can
also be quite powerful it's important so
a fall for example in the price of
good-x let's make it the price of coffee
makes coffee relatively cheaper compared
to substitutes such as tea
all bottled water and if that happens
some consumers may switch to the to
coffee leading to increased demand the
key to the scale of the size of the
substitution effect is whether two or
more products are close substitutes and
also critically how easy and how
inexpensive it is to make a switch so
when the price changes in the market
there's an income effect and a
substitution effect what causes the
demand curve for product to shift in
other words what causes an outward
movement - the demand curve or possibly
what causes an inward movement for the
de'longhi well here are some key factors
that influence the demand curve I think
most importantly it's the change in a
relative price of a substitute those are
two goods in competitive demand for
example two different bands of Cola or
carbonated water are changing the price
of complements can affect demand and
we'll have a separate topic video on
joint demand a fall in the price of one
good will cause you to buy more of it
and possibly more of a complementary
product the real income of consumers
income adjusted for inflation is also
important in determining consuming there
are normally four normal Goods when real
income goes up our ability to buy a good
or service increases and this causes an
outward shift to the demand curve
equally when incomes for then we might
expect an inward shift of demand
except for inferior Goods and again
we'll have a separate topic video on
inferior Goods the distribution of
income is also a key factor that can
affect the demand curve so for example
if we shift income towards relatively
poorer lower-income households for
example they tend to spend a higher
percentage of their income and therefore
a redistribution of income put in theory
increase total market demand and there
were other factors that can clearly
cause shifts in demand
the effects of effective persuasive
advertising and marketing the level of
interest
can affect the demand for products
particularly those that are bought on
credit the the population can affect
demand not just the total size affected
for example by natural population growth
and by migration but also the age
structure will affect both the level and
the pattern of consumer demand and
something we'll look at in a moment of
to seasonality comes in so there's often
some strong seasonal factors affecting
demand for different goods and services
and those of you interested in
behavioral economics social and
emotional factors are increasingly seen
as factors affecting the demand curve
take a moment if you need to to press
the pause button so you can get some
good notes here on key causes of shifts
in demand let's fill it straight how
this happens key revision point is on
the bottom of this slide a change in the
market price for example the price of
coffee does not cause a shift in the
demand curve please remember this
a change in the market price of coffee
causes a movement along the demand curve
factors other than the price of coffee
including those we've just been through
they if they change they will cause a
shift in demand for coffee D 1 to D 3 is
an inward shift of demand that means
that less is bought at price P 1 D 1 to
D 2 is an outward shift of demand that
means more is demanded at each price
let's take some examples of where demand
has been shifting here's an increase in
the global market demand for wearable
devices including smartwatches now
what's causing this well clearly incomes
have been rising marketing's being very
effective so there's clearly been a huge
rise in the global demand for wearable
devices how much further can it go we
wait to see on the other hand the market
demand for Apple iPods has been
shrinking rapidly particularly since
2009 2010
presumably because superior technology
products have emerged and so the market
demand for this product has more or less
collapsed changing preferences from
consumers are also important in shifting
demand this chart shows the preferences
for movie consumption in the UK for
example buying a DVD downloading it
going to see a film for example the
pattern of demand is changing digital
sales now account for 20% and that can
only rise presumably the share from
physical sales of DVDs is falling when
was the last time you bought a DVD of a
movie at the other hand sales can fall
and then recover this is fascinating
in the long run we felt that the demand
for vinyl albums in music stores were
continued to fall for most of the PERT
95 all the way through to 2005-2006 did
demand was falling however 2014 well
over 1.2 million vinyl albums result a
six-figure increase on the 2007 level
why is this happening
is it an increase in retro demand from
consumers it's clearly a change in
consumer preferences
people thought that vinyl sales would
collapse but maybe the final countdown
has been delayed seasonality is a really
important factor not often covered in
the textbooks but we'll cover it here so
seasonality refers to fluctuations in
sales related to the different seasons
of the year and for many products there
are strong seasonal peaks and troughs in
both sales and production so for example
tomorrow for chocolate Easter is off as
often strong people tomorrow more summer
fruits in the summer and will winter
clothing when when the conditions get
harsh in the winter so it's important to
recognize that for many businesses the
demand is non-uniform during the year
there's very strong seasonality ranging
from clothing to tourism
even to theaters during the pantomime
season and something else it's worth
considering is social and emotional
factors this is where increasingly
behavioral economics is starting to come
into mainstream thinking about the
theory of demand so social factors can
affect behavior and therefore demand for
different products for example increased
social awareness of the health risks
from smoking from gambling social norms
so these are norms of behavior which
become ingrained in people's patterns of
behavior so for example the increase in
the price of plastic bags from
supermarkets the 5p charge in the UK
that may well be changing social norms
people now new Tingley going to
supermarkets with their own box
it's can also affect the demand for
recycled bags social pressures are
important peer pressure
affecting the demand for legal highs for
example so it's important to understand
social factors and then we have
emotional factors this is where demand
for products can depend on whether
somebody's in a cold state of a hot
state and there was emotional volatility
emotional arousal for example can affect
the demand for health insurance after
major incidents people at times of
personal stress and insecurity in their
lives may engage in binge drinking and
eating many of us have an emotional
demand for products such as a season
ticket to our favorite football club or
a motional damar for particular types of
antiques and collectibles so economics
textbooks don't really have much to say
about social factors and emotional
factors but I think it's important
you're working you recognize them in
your economics and in a world of digital
technology and global digital platforms
networks can affect demand choices
increasingly
the choices that we make are influenced
by the decisions and behavior of others
within our own social networks
the classic example surely has to be
which messenger app we choose to use
which social network we choose to
operate it
there are very very strong Network
effects on our demand choices market
demand is often linked so lots and lots
of factors come to play the rise of the
iPhone is one of the incredible features
of our age launched in 2007 in 2015
annual sales are expected to climb above
230 million units for the Alpha Apple
the smartphone the iPhone is both one of
their biggest most successful products
but also the biggest source of their
profits absolutely staggering have a
think about the demand factors that
collectively have brought about the
increase in the market demand
it's obviously to do with price to do
with income with marketing but also
think about the social emotional and the
network factors at play
so in this topic video we have explored
demand the demand curve shifts in demand
and some of the key factors that affect
total market demand for goods and
services