 Hi, Professor Gerald Friedman, Department of Economics, University of Massachusetts. Here today to talk about changes in supply and demand, how to tell what's going on in markets, at least if markets work efficiently and perfectly, competitively and all that. But we're going to forget about this. We can imagine four situations in terms of changes in price and changes in quantity. You can imagine, for example, situation where you have a product where both the price and quantity increase. For example, cocaine in the United States over the last 20 years. The quantity sold has been rising and prices have been rising. What could account for this? Could it be a change in supply? Because of those nasty people from third world countries selling cocaine in the United States? Or is it a matter of increases in demand? Because Americans have discovered the joys of getting high on cocaine and addicted and needing rehab, etc. Well, if both prices and quantity have gone up, then we know that there must be an increase in demand because people are willing to pay more for more. They're buying even more stuff, even though the prices are higher. So demand must be dominating the increase. There may be a shift out in supply. It's possible, but since prices are higher, we would be expecting with an upward slope and supply curve that supplies will be supplying more. So there may be no change in oil and supply. The dominant thing going on is an increase in demand. That's cocaine. Policy implication? Stop worrying so much about supply and start doing more about demand. There are other products. For example, oil markets demand, the amount purchased has gone down a little bit, but prices are much higher, demand or supply. Well, people are paying more to get less. This sounds like we're moving along the demand curve and the major change is supply. Iraq isn't producing as much oil as it used to. Nigeria isn't producing as much oil as it used to. More of the change in oil markets is coming from supply than from demand. Let's say you have other products like GM cars or VHS cassettes, lower prices, and despite the lower prices, people are buying less. Here we have a shift down in demand. People don't want that stuff. The only way you can get them to buy it is by lowering prices. Finally, you have situations where quantity has gone up and prices have fallen. Laptop computers and the flip camera on which Manisha is filming me right now. This camera is like 100 bucks for a nice video camera that easily uploads stuff to YouTube. Magnificent. Of course, people are buying lots of them. No change in demand. People would have always been willing to buy these things if prices were this low. Why are prices so low? Suppliers shifted out because we figured out better ways to make microelectronics. I hope you are enjoying your better, cheaper microelectronics today. Thank you. Have a good day.