Assume that regular toasters and defibrillator toasters are substitute goods. If the price of regular toasters rises, a) what happens to the demand for defibrillator toasters, and b) what happens to the demand for regular toasters? Look at that thing. That thing's awesome. Right? Alright. So let's see what happens here. What we do know is that the price of regular toasters is going up, and they're asking us what's going to happen to the demand for our defibrillator toasters. Let's use DEF for the defibrillator. What's going to happen to the defibrillator toaster? As we know with substitute goods, when the price of a substitute good rises, the demand for this good is going to increase. Right? So this is, I like to think of it as a good thing happening for defibrillator toasters. The idea is that the price going up for regular toasters is going to cause people to buy more defibrillator toasters instead. So that's a good thing happening for defibrillator toasters, and we know good things shift us to the right. So the demand is going to go up here. Let's go ahead and put this on the graph. If this was our original demand for defibrillator toasters right here at D1, and we'll label our axes too. We've got our price and our quantity down here, in alphabetical order left to right. So, our demand for defibrillator toasters is going to increase. We're going to shift to the right, and we'll draw a new line, nice and parallel here, and that's going to be D2 right there. That is our new demand; we've shifted to the right. Okay, cool.
So, how about part b? What happens to the demand for regular toasters? Right? So what has happened, we know that there was a price increase, right? We had a price increase for regular toasters. So what's going to happen in the market for regular toasters? If one of you went ahead and drew this demand curve here to the left, I want to tell you that you're wrong, and it's a good thing you're here because you will fail the exam if you do that. The idea here is in the market for regular toasters, we are seeing a price change in regular toasters. This is the one thing that keeps us on the same demand curve. So if we were to say we were here originally, let's say that was the original price and quantity. Let's label our axes, P up here, Q down here, and we are going to have this original price P1 and original quantity Q1. Let's say in this situation the price increased. So the price increased here to P2, and at P2, what's going to happen? Notice we're still on the same graph; we did not draw a new line. So because the price increased for regular toasters, the quantity demanded of regular toasters is going to decrease. Notice in this case, I use the QD because we're talking about the quantity demanded, not the whole demand line shifting. So I hope that makes sense to you. That's where we want to be careful. When will the price change affect our product? And that's when we stay on the same line. Cool? So the price change originally, it was affecting the demand for defibrillators, and that's why we drew a new line. Alright. Let's go ahead and move on.