Demand and Supply Part 2

Summary

In this educational video, host Elias delves into the supply side of the market, explaining the concept of supply, its relationship with price, and the law of supply. The video outlines factors affecting supply, including input prices, technology, and government policies like taxes and subsidies. It also discusses the determinants of supply and how they can shift the supply curve. The script concludes with an exploration of market supply, emphasizing the collective impact of individual producers on overall market supply.

Takeaways

• 📈 The law of supply states that, all else being equal, an increase in price leads to an increase in the quantity supplied, and vice versa, indicating a direct relationship between price and quantity supplied.
• ⏱ The concept of supply considers the amount of a product producers are willing and able to sell at various prices over a specific period, including future time frames.
• 💡 Willingness and ability are key components of supply; if producers are willing but unable to supply, or able but unwilling, the supply is affected.
• 📊 The supply curve graphically represents the relationship between price and quantity supplied, typically showing an upward slope indicating increased supply with higher prices.
• 🔄 Changes in input prices, technology, and the price of related goods can shift the supply curve, reflecting changes in the quantity supplied at each price level.
• 🔄 An improvement in technology can lead to a rightward shift in the supply curve, indicating an increase in supply, while deterioration can cause a leftward shift, reducing supply.
• 🍦 The price of related goods, such as substitutes or complements, influences supply. For example, an increase in the price of a substitute good can lead to an increase in the supply of the related good.
• 🔮 Producers' expectations about future prices can affect current supply levels. If they anticipate higher future prices, they might reduce current supply to maximize profits later.
• 💼 The number of sellers in the market is a determinant of supply; more sellers typically lead to increased supply, while fewer sellers can reduce it.
• 💵 Taxes and subsidies can significantly impact supply. Higher taxes can reduce supply by increasing production costs, while subsidies can lower costs and increase supply.

Q & A

What is the definition of supply in the context of the market?

Supply is the amount of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specified period of time.

What does the law of supply state?

The law of supply states that, ceteris paribus, an increase in the price of a product will lead to an increase in the quantity supplied, and conversely, a decrease in price will lead to a decrease in quantity supplied.

What is the difference between a supply schedule and a supply curve?

A supply schedule is a table showing the total quantity of a good or service that producers wish to supply at each price, while a supply curve is a graphical representation of the quantity supplied of a given product as its price varies.

How does the price of inputs affect the supply of a product?

If the price of inputs decreases, it becomes cheaper to produce, leading to an increase in supply. Conversely, if input prices increase, production costs rise, leading to a decrease in supply.

What role does technology play in determining supply?

Improvements in technology can lead to increased efficiency in production, thus increasing the supply of a product. Deterioration in technology can reduce the quantity supplied due to decreased efficiency.

How do the prices of related goods influence supply?

For substitute goods, an increase in the price of one good can lead to an increase in the supply of its substitutes as producers shift resources to take advantage of higher revenues. For complementary goods, a decrease in the price of one good can lead to an increase in the supply of its complements.

What impact do expectations about future prices have on current supply?

If producers expect prices to rise in the future, they may reduce current supply to capitalize on higher future prices. Conversely, if they expect prices to fall, they may increase current supply to sell before prices decrease.

How does the number of sellers in the market affect the overall supply?

An increase in the number of sellers can lead to an increase in the overall supply of a product, as more firms produce and offer the good for sale. A decrease in the number of sellers can lead to a reduction in supply.

What is the effect of taxes and subsidies on supply?

Taxes increase the cost of production, which can lead to a decrease in supply as firms supply less. Subsidies, on the other hand, reduce production costs, leading to an increase in supply as firms are encouraged to produce more.

Can you provide an example of how the supply curve shifts due to changes in input prices?

If the price of inputs decreases, the supply curve shifts down and to the right, indicating an increase in supply. If input prices increase, the supply curve shifts up and to the left, indicating a decrease in supply.

How is market supply calculated and represented graphically?

Market supply is calculated by summing the individual supplies of all producers at each price level. Graphically, it is represented as a more elastic curve compared to individual supply curves, reflecting the combined supply decisions of all market participants.

Outlines

00:00

📈 Introduction to Market Supply

The video begins with host Elias introducing the concept of market supply. He outlines the video's agenda, which includes discussing the law of supply, the distinction between supply and quantity supplied, and the determinants of supply. The law of supply is defined as the relationship between a product's price and the quantity producers are willing to supply, with a positive correlation. The video also mentions the importance of considering both current and future time periods when analyzing supply, as well as the distinction between the willingness and ability of suppliers to produce goods. The law of supply is further explained with the ceteris paribus assumption, emphasizing that an increase in price leads to an increase in the quantity supplied due to the profit motive of suppliers.

05:05

📊 The Supply Curve and Its Determinants

Paragraph 2 delves into the graphical representation of supply, known as the supply curve, which illustrates the relationship between price and the quantity of a product that producers are willing to supply. The paragraph explains how a supply schedule is transformed into a supply curve on a graph, with price on the vertical axis and quantity supplied on the horizontal axis. The upward-sloping supply curve reflects the positive relationship between price and quantity supplied. The paragraph also discusses the various factors that can shift the supply curve, including the price of the commodity itself, input prices, technology, the price of related goods, expectations, the number of sellers in the market, and taxes and subsidies.

10:06

⚙️ Impact of Input Prices and Technology on Supply

Paragraph 3 focuses on the impact of input prices and technology on the supply of goods. It explains how a decrease in input prices can lead to an increase in supply, as it becomes cheaper to produce, causing the supply curve to shift to the right. Conversely, an increase in input prices can lead to a decrease in supply, shifting the curve to the left. The paragraph also addresses the role of technology in supply, with improvements leading to more efficient production and an increase in supply, while deterioration in technology can reduce the quantity supplied. The graphical representation of these shifts is discussed, with examples provided to illustrate how changes in input prices and technology affect the supply curve.

15:07

🔄 Effects of Related Goods, Expectations, and Market Participants on Supply

Paragraph 4 explores the effects of related goods, future expectations, and the number of market participants on supply. It distinguishes between substitute and complementary goods, explaining how changes in the price of one can affect the supply of another. The paragraph also discusses how producers' expectations about future price changes can influence current supply levels, with expectations of higher future prices leading to a decrease in current supply and vice versa. Additionally, the number of sellers in the market is highlighted as a determinant of supply, with an increase in sellers leading to an increase in supply and a more elastic supply curve. The paragraph concludes with a discussion on taxes and subsidies, explaining how they can act as costs or incentives, respectively, affecting the supply of goods.

20:09

💼 Market Supply and Its Elasticity

The final paragraph discusses the concept of market supply, which is the sum of the individual supplies of all producers in the market. It provides an example to illustrate how the market supply is calculated by aggregating the quantities supplied by different firms at various price levels. The paragraph emphasizes that market supply curves are generally more elastic than individual supply curves due to the aggregation of multiple suppliers. The video concludes with an invitation for viewers to send questions to the host and a预告 of the next topic, which will cover elasticity in more detail.

Keywords

💡Supply

Supply refers to the amount of a product that producers are willing and able to offer for sale at various prices during a given period. In the video, the concept is central to understanding how producers' behavior changes with price fluctuations. For instance, the script mentions that an increase in price typically leads to an increase in the quantity supplied, demonstrating the direct relationship between price and supply.

💡Law of Supply

The Law of Supply states that, all else being equal, an increase in the price of a product will lead to an increase in the quantity supplied by producers. This principle is fundamental to the video's discussion on supply-side economics. The script uses the law to explain the positive correlation between price and quantity supplied, emphasizing the profit motive of suppliers.

💡Supply Schedule

A supply schedule is a table that shows the total quantity of a good or service that producers are willing to supply at each price level. The video script uses this concept to transition from a tabular representation to a graphical one, illustrating how the data in a supply schedule can be plotted to form a supply curve.

💡Supply Curve

The supply curve is a graphical representation that shows the relationship between the price of a good or service and the quantity that producers are willing to supply. The video explains that the supply curve typically slopes upward, indicating that as prices increase, so does the quantity supplied, reflecting the profit motive of suppliers.

💡Determinants of Supply

Determinants of supply are the factors that influence the quantity of a product that suppliers are willing to offer in a market. The video identifies several determinants, including the price of the good, input prices, technology, and government policies. These factors are crucial for understanding shifts in the supply curve and how they affect market dynamics.

💡Input Prices

Input prices refer to the costs of the resources used in the production process. The video explains that changes in input prices can shift the supply curve. For example, if the cost of labor or machinery decreases, it becomes cheaper to produce, leading to an increase in supply, represented by a rightward shift of the supply curve.

💡Technology

Technology as a determinant of supply refers to the methods and processes used to produce goods and services. The video script notes that advancements in technology can increase supply by making production more efficient, leading to a rightward shift in the supply curve. Conversely, a deterioration in technology can decrease supply.

💡Price of Related Goods

The price of related goods, such as substitutes or complements, can affect the supply of a product. The video script explains that if the price of a substitute good increases, suppliers may increase the supply of their own product to capitalize on the higher demand. This concept is illustrated through the example of ice cream and its substitutes.

💡Expectations

Expectations about future market conditions can influence current supply decisions. The video script discusses how if suppliers anticipate higher prices in the future, they might reduce current supply to maximize profits later. This behavior can lead to a leftward shift in the supply curve in the present.

💡Number of Sellers

The number of sellers in a market is a determinant of market supply. The video explains that an increase in the number of sellers can lead to an increase in total supply, as more firms contribute to the market. This is demonstrated in the script through the example of firms entering the market to supply a product like tables.

💡Taxes and Subsidies

Taxes and subsidies are government policies that can affect supply. The video script clarifies that taxes increase the cost of production, potentially leading to a decrease in supply, shown as a leftward shift in the supply curve. Subsidies, on the other hand, can reduce production costs and increase supply, causing a rightward shift in the supply curve.

Highlights

Introduction to the supply side of the market by host Elias.

Definition of supply as the amount of a product producers are willing and able to sell at various prices over a period of time.

Explanation of the importance of considering a series of prices and a specified period of time in supply analysis.

Emphasis on the willingness and ability of suppliers to produce and sell goods as key components of supply.

Statement of the law of supply, which posits a direct relationship between price and quantity supplied.

Discussion of the ceteris paribus assumption in the context of supply and its implications.

Illustration of the supply curve as a graphical representation of the relationship between price and quantity supplied.

Analysis of how changes in price lead to movements along the supply curve, not shifts.

Identification of input prices as a determinant of supply and their impact on production costs and supply levels.

Examination of technological advancements as a factor affecting supply and their role in increasing efficiency and output.

Exploration of the price of related goods and their influence on the supply of substitute and complementary products.

Discussion of expectations about future prices and their effect on current supply decisions.

Analysis of the number of sellers in the market and how it affects overall supply.

Consideration of taxes and subsidies as determinants of supply, affecting production costs and激励.

Introduction to the concept of market supply as the sum of individual producers' supplies.

Conclusion and invitation for questions, with contact information provided for further discussion.

Transcripts

hello so we now analyze the other side

of the market which is a supply side of

the market I am your host Elias so in

this video I want us to look at the

supply side and what effect the supply

side of the market so let's quickly look

at the outline so we look at the law of

supply and the suppression u and supply

care of distinction and finally we will

look at the determinants of supply and

the determinants on what determines of

quantity is supplied for further reading

you can continuously looking at Matthew

chapter number four and meconium chapter

number three okay so let's begin by

defining supply which is the amount of a

product that producers are willing and

able to make available for sale at each

of a series of possible prices during a

specified period of time now it should

be noted also here that we are looking

at a series of our prices as well as

specified the period of time which means

that for supply we are not only looking

at a given price level but series ever

or a series of prizes and out of those

prices we want to see how the suppliers

will be behaving when prices are

changing and now we should also note

that we are not only looking at the

period today but even the period in the

future therefore suppose that price was

to increase tomorrow or next week how

will the suppliers behave so we should

also note that we also have the

willingness and ability to supply and

with this then we see that the amount

money to supply are defined over a

specified period of time for a series of

presents given that the suppliers are

willing and ever okay so this means that

supply shows the quantities of the

product that will be supplied at various

possible prices holding other factors

constant meaning anything that may

influence supply is held cost and that

the only price is observed so that not

over the two items that stand out the

willingness of friends or suppliers to

make available the products on the

market as well as their ability to do so

so if they are willing to supply but

they are not they are not able to supply

it means supply will not be defined and

if they are able to supply but not

willing we will not be able to define

supply because if they held the

resources then supply will not be

affected okay so now let's then state

the law of supply which says that

ceteris paribus and increase in a

product promise will increase the

quantity of each supplier and conversely

for a decrease in price we will observe

a decrease in quantity supplied which

means that there is a positive or direct

relationship between the price of a

given commodity and the quantity of it

supplied the higher the price the more

suppliers are motivated because they are

the amp their goal is to make profit and

if they see a price going up to them

they feel producing more and therefore

saving all those items will give them

more

profit so any item that is in their

jurisdiction and they are producing it

if it receives a higher price on the

market the supply for that item is

likely to go up so tech note that we

also use the exact teres Paribas

assumption here because supply of the

product is not only a waste by the price

of that item but many other factors that

one may want to consider which may

include the price of related goods the

input price the technology and so on so

let's look at supply should you on the

supply curve now a supply schedule is a

table showing the total quantity of a

good or service that producers wish to

supply at each price in contrast the

supply curve is a graph or a graphical

representation of the quantity supplied

of a given product as well as it's a

price in other words it's a graph

showing the total quantity of a good or

service that producers wish to supply at

each price so what this is the data that

is presented in a table is now plotted

on a graph and therefore we turn it down

to a supply curve in with the aid of a

simple illustration the supply schedule

will take this structure where we have

prices ranging from 2 or the way to 8

and the quantity supplied will ranging

from 0 all the way to 6,000 and you will

notice that as price is increasing the

quantity supplied of a given item is

also increasing if we had to plot this

data on a graph which we'll call a

supply curve so we can put the price

that we have and the quantity supplied

associated with that and clearly we see

that if we plot this data and moving it

down we will see that the structure

looks like this one here and if we join

this with a smooth curve we will have

our supply curve therefore we see that

the supply curve shows a positive

relationship between the price and the

quantity supplied of that item so the

shape of the supply curve reflects the

reality that the number of firms who are

we will be willing to supply a given

commodity when price increases on the

market will also increase

so when price was now the number of

firms will increase because their motive

is to make profit and a higher price is

one indication for or indicator for them

that they are likely to make profit if

they sell more it also implies that the

amount of goods or services services

that firms are willing to sell will

increase with a rise in the price of

those goods and services it should be

noted that it is possible for the supply

curve to start from the original the one

represented did not start from the

origin because we assume that when the

quantity demanded of a given product is

zero the firm the buyers I mean the firm

who charge a price of a tool but when

the price starts from the origin it

means that the quantity supplied will

also be zero

therefore as price goes up firms will be

willing to release many units on the

market because their motive is to make

profit let's look at the determinants of

supply and the quantity

like the first one being the on price of

a given commodity and then we have the

input price we also have the technology

so changes in technology will affect the

supply of a product

on price tech not will only affect the

quantity supplied the rest of these

factors that we are listing down will

affect the supply in totality okay so a

price of related Goods who also affect

the supply we also have expectations the

number of sellers on the market and

finally the taxes and the subsidies it

should be noted that these are not not

the only factors that affect supply

there are many factors that you can

explore okay let's begin with the on

price of a given commodity so if we

assume ice cream and then we note that

changes in the price of ice cream will

affect the quantity supplied of ice

cream and not the entire supply which

means that changes in on price will

affect the quantity supplied but it will

not affect the supply in general so you

will notice that if price increases from

2 to 4 quantity supplied increases to

2,000 price goes to 6 to 6 quantity

supplied increases to 4,000 therefore we

see that then there is a direct

relationship between price and quantity

supplied and therefore price causes a

movement along the supply curve and this

price will not shift the supply curve

let's look at other factors and these

factors will shift the supply curve if

anything happens to them the first one

we look at is the input price now to

produce a good or service producers use

various inputs such as machines labor

and so on

and if the prices of these machines this

labor this labor and all the inputs

brought into the production process

reduce it means it has become cheaper

for the thing to produce and therefore

supply will increase conversely if the

prices for these inputs increase then

the firm's would be incurring higher

costs and therefore they supply for the

product reduces graphically with price

on the vertical axis and quantity

supplied on the horizontal axis with our

initial supply curve as one when the

price of inputs reduce the firm's supply

more units on the market and therefore

the supply curve shifts down and to the

right so tech not for supply a downward

shift and to the right is an indication

that there is an increase in the supply

of the product when the price for these

inputs however increases and the with

price on all the vertical axis and

supply quantity supplied on the

horizontal and s one being our initial

supply curve and increase in the price

of the inputs will reduce the supply and

therefore the supply curve will shift up

and to the left okay so the other factor

or determinant is technology so changes

in technology affect the supply of a

given commodity if there is an

improvement in technology we expect that

firms will supply more on the market

because they will be able to produce

commodities which will be in an

efficient way and

we see that any with the deterioration

in technology will lead to a reduction

in quantity supplied and graphically if

we are considering our initial supply

curve s 1 and that technology has

improved it means that the firm will be

able to supply more units on the market

fast produce more and supplied more

units on the market and therefore our

supply curve will shift down and to the

right to s 2 if on the other hand

technology deteriorates then that means

that our supply will shift to the left

up and the left because supply has will

reduce due to this negative feedback

I mean due to this deterioration in

technology okay so the other determinant

is the price of related goods so

remember when we are looking at this we

distinguish between substitute codes and

complement goods now graphically let's

start with the substitute goods and with

price on vertical and quantity supplied

on horizontal and our initial supply

curve s 1 if we assume that a second

firm is producing 2 substitutes let's

assume same heart and marina if the firm

not says that the price of Fanta has

gone up it means given that all other

factors I held constant then the fame

will have to produce more of the Fanta

because Fanta will generate more revenue

and therefore more profit for the firm

and this will cause the firm to reduce

the resources needed for the production

of morena and Melinda's of

will reduce and if the price on the

other hand price of Fanta reduces it

means that the firm will see father as a

less profitable business and therefore

the fabled China resources away from

some of the resources away from the

production of father and channel them to

the production of Bremen which means

that the supply for marina will increase

and therefore the supply curve will

shift down and to the right to s2 as

stated earlier and the increase in the

price and increase in the price of Fanta

will cause the firm's

to supply more father because they will

channel resources needed for the

production of Marina away towards the

production of Fanta and therefore the

winters winter supply will reduce and

the supply curve will shift up under the

left

we also have the expectations about the

future so your expectations about the

future may affect your supply for a good

or service if you expect prices to be up

tomorrow set prices for minimu to

increase you tomorrow

it means as a firm you hold back all the

mini meals keep them in your warehouse

and then release them tomorrow when

price is high meaning today supply will

be low so with the price when our

vertical axis and quantity supplied on

our horizontal axis and our initial

supply ks1 if there is expectation that

prices will reduce tomorrow or in the

future say maybe next week it means that

firms will have to sell off all the idea

today before the price goes down more

and as such we will have an increase in

the supply today and therefore the

supply curve will shift down and to the

right on the other hand if the frames

expect prices to to increase in the

future

say tomorrow or next week it means that

today for the minimum suppliers for

example the firm's will hold the minimum

in the warehouse and the release them in

the future where the prices are high

this means that today supply will reduce

and therefore the supply curve will

shift up and to the left the other

determinant is the number of sellers in

the market if there is an increase in

the number of sellers on the market it

means we will have a lot of our

quantities produced for a given item and

therefore supply will increase for

example if death has become more

profitable due to an increased a bit

more friends who are willing and able to

produce tables will join the market to

supply the divers as such the supply for

divers will increase and therefore the

supply curve will shift down and to

today right and illustrated with our

initials of my cap s1 an increase in

supply will shift the supply curve down

and to the right and conversely a

decrease in supply will shift the supply

curve up and to the left we also have

the taxes and the subsidies being the

determinants of supply and noted that

businesses treat most taxes as costs

because if the tax is high it means that

death

we'll be incurring more costs in

producing a given item whose tax is high

and if we assume that all taxes are

levied on the suppliers then with the

higher cost

it means the production cost has gone up

and therefore supply reduces conversely

the subsidy is a reverse of the taxes if

we assume that all subsidies are given

to suppliers

it means the cost of production reduces

for suppliers and therefore supply of a

given commodity increases graphically if

we have a price on the vertical axis and

quantity supplied on the horizontal axis

and our initial supply ks14 the effects

of a tax specific setting with the tax

if there is a reduction in the tax which

firms are supposed to play it means the

cost of production reduces and because

of this firms will be more able to

release a lot of you a lot of a lot of

units on the market and therefore supply

for such a commodity will increase and

the supply curve will shift down and to

the right on the other hand if taxes

were to increase the fans will have a

higher cost and therefore they'll supply

less which will cause a supply curve to

shift up and to the left

in the case of the subsidies in the case

of the subsidies if there is a subsidy

given to the suppliers of a given

commodity to promote them so that they

supply more it means the firm's supply

will increase because the cost of

production will somewhat reduce and

therefore the supply curve will shift

down

and to the right and if the subsidies

are removed it means that the subway

here will shift up and to the left now

we should note that price is not is not

the only determinant of a supply there

are many factors that we have looked at

and therefore if we have to present this

into a function then the quantity this

should be quality supplied okay then the

quantity supplied will be affected by

all these factors that we have indicated

now because we hold all these factors

constant okay then our quantity supplied

we write it as simply the function of

price so when drawing the curve we only

consider the price and therefore

quantity supplied becomes the function

of price let's look at the market supply

and if we assume that the market is made

up over three producers the market

supply therefore our product will be the

sum of the individual producer supply

for a product and assuming that price is

fixed on the market so what we see is

that for film a at a price of one point

seven five five thousand units are

produced as supplied and at the price of

three ten thousand units are supplied

for firm B at the price of one

seventy-five 1.75 ten thousand units are

supplied and the at the price of 330

thousand units are supplied if we bring

in FEM C at the price of one point seven

five ten thousand units are

and that the price of 325 units are

supplied and if we add 5000 at the press

of one seven five five thousand plus ten

thousand plus ten thousand we will have

twenty five thousand units on the market

supplied when price is 175 1.75 and if

price is three we will have one ten

thousand plus 30 thousand plus twenty

five thousand which is sixty five

thousand units supplied on the market

and so graphically it means that our

supply market supply will look like that

and it will be more elastic compared to

the individual supply caps

however we will turn to the subject of

elasticity in our next unit okay so

thank you very much for watching if you

have questions remember to send an email

to more alas at gmail.com I will see you

in the next session of a unit 5