Demand and Supply Part 2
Summary
TLDRIn 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
- đ 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.
- â± 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.
- đĄ Willingness and ability are key components of supply; if producers are willing but unable to supply, or able but unwilling, the supply is affected.
- đ The supply curve graphically represents the relationship between price and quantity supplied, typically showing an upward slope indicating increased supply with higher prices.
- đ 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.
- đ 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.
- đŠ 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.
- đź 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.
- đŒ 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.
- đ” 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
đ 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.
đ 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.
âïž 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.
đ 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.
đŒ 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 aéąć of the next topic, which will cover elasticity in more detail.
Mindmap
Keywords
đĄSupply
đĄLaw of Supply
đĄSupply Schedule
đĄSupply Curve
đĄDeterminants of Supply
đĄInput Prices
đĄTechnology
đĄPrice of Related Goods
đĄExpectations
đĄNumber of Sellers
đĄTaxes and Subsidies
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 andæżć±.
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
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