Macro 1.5 - Supply - NEW!

Summary

This 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

• 📈 Supply is the mirror image of demand and refers to the ability and willingness to sell a good or service.
• 💡 To understand supply, one must think from the perspective of a seller, considering what prices they prefer.
• 👟 The law of supply states that there is a positive relationship between price and quantity supplied; as price increases, so does the quantity supplied.
• 📊 The supply curve is upward sloping, indicating that higher prices lead to more quantity supplied and vice versa.
• 💰 The supply schedule is a table that shows the quantity supplied at each price, reflecting the positive relationship between price and quantity.
• 🔄 A movement along the supply curve occurs due to a change in price, not a change in supply itself.
• 🐯 The acronym 'TIGERS' represents the determinants of supply: Technology, Input costs, Government policies, Expectations, Related goods, and Number of sellers.
• 🛠️ Improved technology can increase supply by making it possible to produce more goods or services.
• 📉 Increased input costs can decrease supply as it becomes more expensive to produce goods.
• 💼 Government policies, such as taxes and subsidies, can shift the supply curve left or right, respectively.
• 🔮 Sellers' expectations about future prices can influence current supply levels, with higher expected future prices leading to lower current supply.
• 🛍️ 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

00:00

📈 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.

05:01

🔄 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.

Keywords

💡Demand

Demand refers to the quantity of a product or service that consumers are willing and able to buy at various prices during a given period. In the video, it is mentioned as being more intuitive for students, setting the stage for the discussion on supply. The script contrasts demand with supply to highlight the different perspectives of buyers and sellers in an economic transaction.

💡Supply

Supply is the ability and willingness to sell a good or service. The video emphasizes the importance of thinking like a seller to understand supply. It is the mirror image of demand and is represented graphically as an upward-sloping curve, indicating a positive relationship between price and quantity supplied.

💡Price

Price is the amount of money required to purchase a good or service. The script uses the concept of price to illustrate the law of supply, showing that sellers are more willing to supply goods at higher prices, as demonstrated in the hypothetical scenario where the econ teacher offers to buy the student's shoes at increasing prices.

💡Quantity Supplied

Quantity supplied is the amount of a good or service that producers are willing to offer for sale at a particular price. The video explains that as price increases, so does the quantity supplied, and vice versa, which is a fundamental principle of supply.

💡Supply Curve

The supply curve is a graphical representation showing the relationship between the price of a good and the quantity that producers are willing to supply. In the video, it is described as upward-sloping, indicating that higher prices lead to an increase in the quantity supplied.

💡Supply Schedule

A supply schedule is a table that shows the quantity supplied at each price level. It is used in the video to illustrate the positive relationship between price and quantity supplied, reinforcing the concept that sellers prefer to sell more at higher prices.

💡Technology

Technology is one of the determinants of supply mentioned in the video. Improvements in technology can increase supply by making it possible to produce more goods or services, while a decrease in technology, such as through destruction, can reduce supply.

💡Inputs

Inputs refer to the resources and labor required to produce a good or service. The video explains that when input costs increase, supply decreases because production becomes more expensive, and conversely, when input costs decrease, supply increases.

💡Government Policies

Government policies, specifically taxes and subsidies, are highlighted in the video as factors that can affect supply. Taxes can decrease supply by making production more expensive, while subsidies can increase supply by providing financial incentives for production.

💡Expectations

Expectations about future prices influence supply decisions. The video explains that if sellers expect prices to rise in the future, they may decrease today's supply to sell at a higher price later. Conversely, if prices are expected to fall, supply today may increase to avoid selling at a lower price in the future.

💡Substitutes and Complements

Substitutes and complements are related goods that affect supply. Substitutes can be produced using the same inputs, and if the price of one substitute increases, the supply of the other may decrease as producers shift towards the more profitable good. Complements in production are goods where an increase in the production of one leads to an increase in the supply of the other, as illustrated by the example of beef and leather in the video.

💡Number of Sellers

The number of sellers in a market is a determinant of supply. An increase in the number of sellers entering the market leads to an increase in supply, while a decrease in sellers results in a decrease in supply, as explained in the video.

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