Price of related products and demand | Microeconomics | Khan Academy | Summary and Q&A

706.1K views
December 30, 2011
by
Khan Academy
YouTube video player
Price of related products and demand | Microeconomics | Khan Academy

TL;DR

The price of related products can influence the demand curve: if substitutes become more expensive, demand shifts to the right, while if complements become more expensive, demand shifts to the left.

Install to Summarize YouTube Videos and Get Transcripts

Questions & Answers

Q: How does the law of demand impact the price-quantity demanded relationship?

The law of demand states that as price increases, quantity demanded decreases, and vice versa. This relationship holds true as long as other factors remain constant.

Q: What happens when the prices of substitutes increase?

When the prices of substitutes increase, the demand for the product in question increases as well. This is because the substitute products become less desirable or more expensive, making the original product relatively more attractive.

Q: How does a change in the price of complements affect quantity demanded?

If the price of complements, such as a Kindle for ebooks, increases, the quantity demanded for the ebook will decrease. This is because fewer people will have the complement product or have less money to spend on the original product.

Q: How do changes in the prices of related products affect the demand curve?

Changes in the prices of related products can shift the demand curve. If the prices of substitutes increase, the demand curve shifts to the right. If the prices of complements increase, the demand curve shifts to the left.

Summary & Key Takeaways

  • The law of demand states that raising the price of a product decreases quantity demanded, while lowering the price increases it.

  • The price of related products, such as substitutes or complements, is assumed to be constant when analyzing the price-quantity demanded relationship.

  • If the prices of substitutes increase, demand for the product in question goes up, shifting the demand curve to the right. On the other hand, if the prices of complements increase, demand shifts to the left.

Share This Summary 📚

Summarize YouTube Videos and Get Video Transcripts with 1-Click

Download browser extensions on:

Explore More Summaries from Khan Academy 📚

Summarize YouTube Videos and Get Video Transcripts with 1-Click

Download browser extensions on: