Change in demand versus change in quantity demanded | AP Macroeconomics | Khan Academy

What we're going to do in this video is a deep dive into the difference between demand and quantity demanded. In particular, we're going to focus on change in demand versus change in quantity demanded.

And so just as context, I have price versus quantity here for brand X of cars in a certain market, and you see the demand curve for brand X of cars. We see that it follows the classic law of demand: at a high price, there is a low quantity demanded.

And so this is already trying to draw the distinction. A quantity demanded, so I'll call this Qd1, is associated with a particular point on the demand curve. It's not the whole curve itself. When people talk about demand, they're talking about the whole curve.

But just following on what I just said, following the law of demand, at a low price, this is associated with—if we go to the demand curve—a high quantity demanded, quantity demanded two.

And so to be very particular about this, quantity demanded is associated with a particular point on the demand curve, while the demand curve is a set of all of these points that show how price and quantity are associated.

So with that out of the way, to make things more tangible, let's go through a bunch of different circumstances and think about whether they would result in a change in demand versus a change in quantity demanded.

So in this first scenario, we say car dealerships slash prices by 10%. Would that result in a change in demand, which would involve shifting our demand curve, or would it involve a shift along the curve, a change in quantity demanded?

Pause the video and try to figure it out.

Well, there's a couple of ways to think about it. In order to shift the demand curve itself, the one way I think about it is if you were to pick a given price. If you were to pick a given price, does what's described here in any way shift the quantity that would be demanded at that price?

Well, no. This is not shifting how much consumers would want to buy at that price. This is just shifting the price itself. So this is going to be a shift along the demand curve.

So this would be a scenario where maybe the equilibrium price—and we'll talk more about that in future videos—maybe the equilibrium price and quantity demanded are associated with that point right over here before car dealers slash their prices.

So let's say call this quantity demanded; let's call that quantity demanded three. But then when they slash their prices, the prices go down, and so we end up with this point on our demand curve.

And so this would be quantity demanded, quantity demanded four. So this would be a change in quantity demanded right over here. So change—I’ll do delta for change in—change in quantity demanded. And in this case, the quantity demanded would go up.

What about the price of gasoline increases? Pause this video, think about what would happen. Would that change the quantity demanded for the cars, or did it shift the entire demand curve?

Well, I'll do the same exercise. Pick a given price. Let's say we're at this price right over here, and this is the current quantity demanded. Now, if all of a sudden—actually, for any price that I pick—if the price of gasoline increases, consumers will just have less money in their pockets.

The cost of maintaining and using a car at any price would go up, and so they might be willing to buy less cars because the operating cost has gone up. And this would be true at any price, at any price.

And so one way to think about it is the entire demand curve—the way I've just phrased it—you could view it for the entire demand curve would shift. So if we call this D1 here, now this would be D2.

So here we would say change in demand. And in this case, our change in demand, it would shift; it would go down. You could view it as shifting to the left. Actually, let me write that as shifting to the left because that's what it looks like on this graph.

Let's do this third example. Prices of public transportation go down. What would happen? Is this a change in quantity demanded, or would it be a shift in the demand curve?

Well, once again, for any given price that we are talking about, whether we're talking about here or whether we're talking about here, the substitute—or one of the substitutes—which is public transportation is now looking more favorable.

So you can imagine people at a given price will just not demand the market; will just not demand as much of a quantity. And so this once again would be a change in the demand curve. When something is true for any given price along the curve, then you know that you're going to be shifting the curve.

So our change in demand—and once again we're going to shift to the left—so it's similar to bullet point two.

Now let's see here. We say the state lowers vehicle registration fees. Pause this video and think about that.

Well, once again, regardless of where we might be sitting along the demand curve, now if registration fees have gone down, now the total cost of ownership of a car has gone down. And so for any given price, people might be able to demand a little bit more car.

And so here we would have a shift of the demand curve to the right, a shift of the demand curve to the right. We could call this D3 right over here. So we have a change in the entire demand curve, not just quantity demanded, and we are going to the right.

Let's do this. What is this? The fifth example: a recession leads to falling household incomes. Pause this video and think about it.

Well, falling household incomes is actually analogous in some ways to the price of gasoline increases because people are just going to have less incomes. Regardless of what point we are on the curve, people are just going to be able to buy less.

So that's going to shift the demand curve—the entire demand curve—to the left. So it's a shift in demand, or change in demand, once again, going to the left.

Last but not least, consumers expect new car prices to rise next year. What is that going to do? Is that going to be a change in demand or change in quantity demanded? Pause the video and think about it.

Well, once again, this is something that applies regardless of where we happen to sit at a given moment on the curve. Whatever the equilibrium price is—and we'll talk more about that in other videos—this is generally going to apply to any point that we are on the curve.

If people expect prices to increase—if all of a sudden there's a bulletin that says, "Hey, car prices are going to double next year," well then you can imagine wherever we are on the curve, people are going to say, "Oh, if car prices are going to double next year, I better buy more cars right now."

So our entire demand curve is going to shift to the right. So it's a change in the entire demand curve, and it is going to go to the right.

So the big picture here: if we're talking about a change in—well, you could say a change in a particular price. You know, someone raises the price or lowers the price—well, that's going to change the quantity demanded.

And later, when we draw the supply curve and we see where they intersect, and you have an equilibrium price, when one or both of the curves shift, their intersecting point changes.

And so then you could have a shift in the curves, which will then result in a change in the quantity demanded. But if we're talking about things that are generally true, regardless of where we are on the curve, that will just affect people's general demand for something—

that is going to shift the entire curve. It's going to be a change in demand versus a change in quantity demanded.