Macro 1.5 - Supply - NEW!
Summary
TLDRThis educational video script delves into the concept of supply in economics, contrasting it with demand and emphasizing the importance of thinking like a seller. It defines supply as the willingness and ability to sell goods or services and illustrates this with a humorous scenario involving selling shoes. The script explains the upward-sloping supply curve, which shows the positive relationship between price and quantity supplied. It also introduces the acronym 'TIGERS' to remember the determinants of supply, including technology, input costs, government policies, and expectations. The video concludes by discussing how supply and demand interact in the market, inviting viewers to engage with practice questions and study aids.
Takeaways
- đ Supply is the mirror image of demand and refers to the ability and willingness to sell a good or service.
- đĄ To understand supply, one must think from the perspective of a seller, considering what prices they prefer.
- đ The law of supply states that there is a positive relationship between price and quantity supplied; as price increases, so does the quantity supplied.
- đ The supply curve is upward sloping, indicating that higher prices lead to more quantity supplied and vice versa.
- đ° The supply schedule is a table that shows the quantity supplied at each price, reflecting the positive relationship between price and quantity.
- đ A movement along the supply curve occurs due to a change in price, not a change in supply itself.
- đŻ The acronym 'TIGERS' represents the determinants of supply: Technology, Input costs, Government policies, Expectations, Related goods, and Number of sellers.
- đ ïž Improved technology can increase supply by making it possible to produce more goods or services.
- đ Increased input costs can decrease supply as it becomes more expensive to produce goods.
- đŒ Government policies, such as taxes and subsidies, can shift the supply curve left or right, respectively.
- đź Sellers' expectations about future prices can influence current supply levels, with higher expected future prices leading to lower current supply.
- đïž Changes in the price of related goods, such as substitutes and complements in production, can affect the supply of related items.
Q & A
What is the main challenge students face when learning about supply?
-The main challenge students face when learning about supply is that it can be more challenging than demand, as most people have more experience buying than selling.
What is the definition of supply in the context of this script?
-Supply refers to the ability and willingness to sell a good or service.
Why do sellers prefer higher prices according to the script?
-Sellers prefer higher prices because it indicates a positive relationship between price and quantity supplied, meaning as the price increases, the quantity supplied also increases.
What is the law of supply and how is it represented on a graph?
-The law of supply states that there is a positive relationship between price and quantity supplied. On a graph, this is represented by an upward-sloping supply curve.
What is a supply schedule and how does it relate to the supply curve?
-A supply schedule is a table that shows the quantity supplied at each price, illustrating the positive relationship between price and quantity supplied, which is also depicted by the supply curve.
What causes a movement along the supply curve from point A to point B?
-A movement along the supply curve from point A to point B is caused by a change in price, resulting in an increase or decrease in the quantity supplied.
How is a change in supply different from a change in quantity supplied?
-A change in supply refers to a shift of the entire supply curve to the right or left due to factors other than price, while a change in quantity supplied is a movement along the supply curve due to price changes.
What does the acronym 'TIGERS' stand for in the context of supply determinants?
-TIGERS stands for Technology, Inputs, Government policies, Expectations, Related goods, and Number of sellers, which are all determinants of supply.
How does an improvement in technology affect supply?
-An improvement in technology increases supply because it makes it possible to produce more of the good or service.
What is the impact of input costs on supply?
-When input costs increase, supply decreases because it becomes more expensive to produce the good. Conversely, when input costs decrease, supply increases.
How do government policies, such as taxes and subsidies, influence supply?
-Taxes on a good decrease supply because production becomes more expensive, shifting the supply curve to the left. Subsidies, on the other hand, increase supply as they provide financial incentives for producers to produce more.
Outlines
đ Understanding Supply Basics
This paragraph introduces the concept of supply in the context of economic principles. The speaker emphasizes the difference in intuitiveness between demand and supply, noting that most people have more experience as buyers than sellers. The supply is defined as the ability and willingness to sell goods or services. The speaker uses a hypothetical scenario involving selling shoes to illustrate the law of supply, which states that there is a positive relationship between price and quantity supplied. The supply curve is described as upward-sloping, reflecting that higher prices lead to more quantity supplied, and vice versa. The paragraph also explains the supply schedule, a table showing the quantity supplied at various prices, and clarifies the difference between a movement along the supply curve due to price changes and a shift of the supply curve due to changes in supply.
đ Shifts in the Supply Curve
This paragraph delves into the factors that cause the supply curve to shift, using the acronym 'TIGERS' to remember the determinants of supply. Technology improvements can increase supply by making production more efficient, while the destruction of technology can decrease it. Input costs, such as resources and wages, directly affect supply; higher costs lead to decreased supply, and lower costs increase it. Government policies, including taxes and subsidies, influence supply by making production more or less expensive. Expectations about future prices also play a role, with producers withholding supply if they expect prices to rise or increasing supply if they expect prices to fall. The paragraph further explains the impact of the price of related goods, such as substitutes and complements in production, on supply. Lastly, it touches on the number of sellers in the market, noting that more sellers increase supply while fewer sellers decrease it.
Mindmap
Keywords
đĄDemand
đĄSupply
đĄPrice
đĄQuantity Supplied
đĄSupply Curve
đĄSupply Schedule
đĄTechnology
đĄInputs
đĄGovernment Policies
đĄExpectations
đĄSubstitutes and Complements
đĄNumber of Sellers
Highlights
Introduction to the concept of supply and its importance in understanding economic principles.
The intuitive nature of demand compared to the more challenging concept of supply.
Advice on thinking like a seller to better understand supply.
Definition of supply as the ability and willingness to sell a good or service.
The preference of sellers for higher prices and its impact on supply.
The law of supply and its representation as an upward-sloping supply curve.
Explanation of the positive relationship between price and quantity supplied.
Introduction of the supply schedule as a table showing quantity supplied at each price.
Clarification on the difference between a movement along the supply curve and a change in supply.
The acronym 'TIGERS' for remembering the determinants of supply.
The impact of technology on supply, both positively and negatively.
How input costs affect supply, with higher costs leading to decreased supply.
The role of government policies, such as taxes and subsidies, in influencing supply.
The influence of expectations about future prices on current supply levels.
The effect of changes in the price of related goods, including substitutes and complements.
The impact of the number of sellers on market supply.
Encouragement to practice understanding supply and demand with study aids provided.
Closing remarks with an invitation to engage with the content and subscribe for more.
Transcripts
hey everybody welcome back all right so
we've done demand now it's time to meet
the boss supply you ready
hey don't forget to subscribe and smash
that like button while the music plays
[Music]
so i've always found that demand is
pretty intuitive for students but that
supply can be a little bit more
challenging and this makes sense to me
because most of us probably have a lot
more experience buying stuff than we do
selling stuff so my biggest advice is
that when we're thinking about supply
you need to put yourself in the mindset
of a seller if you can consistently do
that you'll stay gold ponyboy
the concepts of supply are basically the
mirror image of demand so you can do
this all right so let's define supply
supply refers to the ability and
willingness to sell a good or service
now what will this look like on our
graph remember i want you to think like
a seller so what kind of prices do
sellers prefer
and if you're struggling with that
question let me pose a hypothetical
scenario to you let's say you're at
school tomorrow and your econ teacher
offers to buy the shoes you're wearing
from you
but you have to sell them to her right
then
she starts by offering you 10 cents
you roll your eyes and don't even
consider selling right
but then she offers you 10 000 bucks
cash in hand i'm willing to bet that
you're going to take this offer a lot
more seriously some of you will probably
sprint to her and have both shoes off
and practically throw the matter besides
being kind of a weird story this is the
law of supply the supply curve is upward
sloping indicating that there is a
positive relationship between price and
quantity supplied
in other words this tells us that as the
price increases the quantity supplied
also increases and when the price
decreases so does quantity supplied now
just one thing here real quick sometimes
students at this point get fixated on a
specific objection saying yeah but
nobody would buy a pair of shoes if it
costs ten thousand dollars and you're
probably right but that's what the
demand curve is for
the supply curve's only job is to show
us what sellers are willing and able to
sell and sellers prefer high prices see
that's not so bad oh yeah and we can
also see this information provided to us
in the form of a supply schedule which
is a table that shows the quantity
supplied at each price again notice the
positive relationship
now turning our attention back to the
graph
what would cause us to move from point a
to point b
the only thing that causes a movement
along the supply curve is a change in
price
in this case the price has risen so we
have an upward movement along the supply
curve resulting in an increase in
quantity supplied now hopefully this
sounds familiar from our demand lesson
but a change in price caused a change in
quantity supplied
i know it's annoying but please remember
this is not the same thing as a change
in supply we'll get to supply changes in
just a minute but since we're still on
our same supply curve then our supply
hasn't changed remember this curve shows
all the quantities we're willing to sell
at all possible prices the only thing
that happened is that the price changed
so we move up or down along the supply
curve to match price with our quantity
supplied now sometimes things will
happen that will actually change our
supply causing the entire curve to shift
either to the right or to the left
we know it has to be something other
than a price change because like we just
established a price change caused a
change in quantity supplied but not a
change in supply and good news i have
another acronym to help you to remember
the determinants of supply
tigers
no the teen tigers is not for our good
friend tony but rather for technology
you are
as your friend tony would say
great if technology improves supply
increases because it is now possible to
make more of the good or service
if technology decreases which typically
means it gets destroyed because of
something like war or natural disasters
supply will decrease now just like with
demand we show an increase in supply by
shifting the supply curve to the right
and a decrease shifts the supply curve
to the left so our old friend ertel the
turtle applies here too
increase right decrease left by the way
i want you to always shift these curves
right and left don't think of it as up
and down otherwise this can easily trick
you into shifting the wrong directions
always right and left
enjoy this meme from the 1940s featuring
your mom's favorite rapper next up are
inputs inputs include things like
resources needed to make the good as
well as wages to pay workers for their
labor
when input costs increase supply
decreases because it's more expensive to
produce the good
on the other hand when input costs
decrease supply increases the g is for
government policies specifically taxes
and subsidies if a government places a
tax on a good the supply decreases
because it's now more expensive to
produce it
this shifts the supply curve to the left
a subsidy is basically the opposite of a
tax it's where the government provides
money to encourage the production of
something so this will increase the
supply because the producers want to
receive the subsidy so they produce more
sellers also respond to expectations
about future prices if they expect the
price to rise in the future today's
supply will decrease because they'd
rather wait to sell it for a higher
price later
if they expect the price to fall though
today's supply increases so they can
sell it before the price decreases
another major determinant of supply is
changes in the price of related goods
just like with demand i'm talking about
substitutes and complements now this
isn't quite as simple as the demand
version because remember we're thinking
about these things from the perspective
of the seller so let's start with
substitutes substitutes are two goods
that can be made using the same inputs
for example leather can be used to
either make leather belts or leather
purses making the belt and purses
substitutes in production
so if the price of a substitute
increases the supply of the other good
will decrease because producers would
rather make the more expensive item
using our example let's say the price of
leather belts is rising
this will cause the supply of leather
purses to decrease as producers shift
towards making more belts and fewer
purses complements in production
represent two goods for which an
increase in the production of one
necessarily causes an increase in the
supply of the other
i apologize in advance for my example
but suppose that there is an increase in
the price of beef
this causes an increase in the quantity
supplied of beef which means that as a
side effect there will also be an
increase in the supply of leather
nothing happened to the price of leather
there wasn't really an intention to
increase the supply of leather but as a
byproduct of the increased beef
production
there is now an increase in the supply
of leather
pour some out for the cow homies
lastly is changes in the number of
sellers if more sellers enter a market
the supply increases and if sellers exit
a market the supply decreases that one's
pretty simple i think all right well
that's it for supply now it's time to
get supply and demand into the same room
at the same time because that's where
the magic happens until next time this
has been
a la money production thanks again for
watching please hit that like button and
be sure to subscribe if you haven't
already and be sure to check out the
description for links to answers to the
practice questions and some of the great
study aids i've made for you i will see
you in the next video
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