Video Transcript: Law of Demand

Hello, welcome back. We're going to discuss the law of demand. Let's break  down the law of demand. Okay, the law of demand is a microeconomic law that  states all other factors being equal, as the price of a good or service increases,  consumer demand for the good or service will decrease, and vice versa. So, the  chart below depicts the law of demand using a demand curve, which is always  downward sloping. Each point on the curve, a, b, and c, reflects a direct  correlation between the quantity demanded and price. So, at point A, the  quantity demanded will be quantity one, and the price will be p1 and so on. So,  the law of demand is so intuitive that you may not even be aware of all the  examples around you. When shirts go on sale, you might buy three instead of  one, the quantity that you demand increases because the price has fallen. When plane tickets become more expensive, you're less likely to travel by air and more likely to choose the less expensive options of driving or perhaps staying home.  The amount of plane tickets that you demand decreases to zero because the  cost has gone up or way too high for you to spend that amount of money. The  law of demand summarizes the effect price changes have on consumer  behavior. For example, a consumer will purchase more pizzas if the price of  pizza falls. The opposite is true if the price of pizza increases. So John might  demand 10 pizzas if they cost $10 each, but only seven pizzas if the price rises  to $12 and only four pizzas if the price rises to 20. So let's take a look at a  demand schedule and chart how demand changes, or the quantity demanded  changes as price changes, right. So let's look at this ebook supply schedule,  right. And then we can see the quantity demanded versus the price, right, in  each different scenario, so let's draw the graph here. Okay, on the vertical axis  will be quantity demanded every time, so on your vertical axis, here, here is your quantity demanded. On your horizontal axis, this will represent quantity  supplied, or your price. Okay, so let's look at demand, so for scenario A, right?  So we're so remember the demand graph is always downward sloping. Okay, so demand is downward sloping, right? So now we'll look at our different price  ranges: $2, $4, $6, $8, $10, $12. Right. Sorry, Wally. Sorry, Wally. I messed that  up. I'm just gonna restart that whole thing. My fault, dude. I'm having them. That  wasn't my fault. Okay, okay, okay. All right, here we go. Ready, 5432, So,  charting the law of demand right for this situation. Okay, so for this ebook  example, we'll draw our graph on the vertical axis, right, we're going to represent quantity demanded, okay, and on the horizontal axis it's going to be represented by price, so. Now, notice and remember that the downward, the demand curve  is downward sloping, right. So, now let's look at the quantity demanded versus  price, right. So, at $2, $4, $6, $8, and so on. Okay, now at $2 we have 60,000  demanded, right? So at $2 we have 60,000 demanded, right, 60,000 demanded  at $2 right. That's a high demand, right, because the price is low, but now we'll  notice as the price increases that our demand will also decrease, right, so So, at $4 at $4 Okay, we are the consumer is demanding 40,000 units, right, of 

ebooks. Okay, now it's $6 notice 30,000, so you'll notice that as the price  increases, the quantity demanded decreases, right. It's just, it's just like anything we just like we spoke about the T-shirt example, when they went on sale, when  the T-shirts went on sale, more T-shirts were demanded because the price was  cheaper. Same in this example, except it's different. You can tell that when the  price goes up, less is demanded, right? So, let's take a look at $8 okay. 25,000  is the demand, okay. And at $10 23,000 demanded. So you can see the scale as the price increases, the quantity demanded decreases. So, quantity demanded  is a figure predicated on the price of a good or service. As price increases, the  quantity demanded for that good or service decreases, as you can see in our  example. Demand itself is predicated on the overall relationship between price  and quantity demanded. In other words, demand itself is the entire demand  curve. If actual demand changed, we would have a totally different curve that  would shift, so, so this is quantity demanded. This entire line represents the  demand. Okay, but if the demand shifts, if the demand itself changes, this curve  will change one way or the other, and it'll become a new plain price point. Okay,  and we'll discuss this later as we go into the course, but for now, just remember  the point I want to make is that this is quantity demanded. This is quantity  demanded. The entire line is the demand curve, and the demand curve can  shift. Okay, so just keep that in mind as we go through this course, and we'll  come back, and we'll cover this later.