And so, for any given price point, the demand would increase.

Let me write that in green.

When we hold everything else equal, we're moving along a given demand curve.

So, income goes up, then that increases demand.

And so essentially, it will shift, it will change the entire demand curve.

If we lower the price of a product, that will raise the quantity demanded of that product.

So, it would shift the demand curve to the right or it would increase demand.

So population goes up.

So income goes down, demand goes up.

I'd rather have than just getting more of this thing right over here

And so if income goes up for this laptop, the demand will increase.

Or another way to think of it is, is this entire demand curve.

If we talk about an actual quantity, we should say the quantity demanded.

That's a demand driver.

They decide to sell their house.

And if there's more cash in the banking system this guy right over here needs less

So this demand curve will also have the same shape from the top left to the bottom right it satisfies the law of demand.

So let's look at possible theories.

And in those cupcake economics videos, I showed that if the demand is pushing up against capacity.

So we'll put price in the vertical axis and we'll put quantity demanded in the horizontal axis.

Actually, we're going to start with aggregate demand and then start talking about aggregate supply.

The brief is that the bus should use 40 percent less energy.

This curve would shift or the entries in this table would shift.

WRlTING Demand goes up.

There is more people that have money in their pockets.

It isn't so much the money supply, although the money supply will have an effect, it's really capacity utilization.

So I get to 8 now.

We're not talking about a particular quantity of demand.

And there is a little bit of a negative feedback, if price goes up.

At any given price point, the quantity demanded will go up.

The supply demand balance is tight.

And the way we show demand increasing is the whole curve shifts to the right so this right over here demand increased demand went up when income went up.

And those who have jobs are being paid more,

This is the total numbers of cupcakes all of the factories in the market can produce.

And I had this captured market. You didn't need contracts.

Well, it has to do with Gresham's law of economics.

And then more people buy.

Scenario E, I raise it to 10.

This guy needs less cash, so it lowers demand.

And then our short run aggregate supply might look something like this, aggregate supply in the short run.

Now let's talk about another one of those factors that we've been holding constant.

I'm sure some of you out there are economists, and you know all about supply and demand.

So in that case, even though the money supply is huge, or a lot larger than it was, people aren't expressing demand.

I should say how price relates to quantity demanded, and how quantity demanded relates to price.

Here is the demand forecast for 1998.