Supply How sellers behave

Summary

This video explains the concept of supply, which is the amount of goods sellers are willing and able to sell at different prices. It covers key terms like quantity supplied, supply schedule, and supply curve. Through a baked goods example, it demonstrates how supply increases with price, explaining how sellers' decisions are influenced by costs, alternatives, and external factors. The video also explores how individual supply curves combine to form a market supply curve, emphasizing how multiple suppliers contribute to the overall market supply.

Takeaways

• 😀 Supply refers to how much of a good sellers are willing and able to sell at various prices.
• 😀 Decisions about selling are influenced by price, alternative opportunities, and opportunity costs.
• 😀 The three key terms related to supply are quantity supplied, supply schedule, and supply curve.
• 😀 Quantity supplied is the amount of a good sellers are willing to sell at a given price.
• 😀 A supply schedule is a table showing the quantity supplied at different prices.
• 😀 A supply curve is a graphical representation of the quantity supplied at different prices.
• 😀 In the example of baked goods, as the price increases, the quantity supplied increases (e.g., selling more cookies as the price rises).
• 😀 Suppliers' decisions are influenced by personal circumstances such as input costs and alternative opportunities.
• 😀 Different suppliers may have different willingness to supply at each price point due to varying costs and outside options.
• 😀 Market supply is the sum of the quantities supplied by individual suppliers at each price level.
• 😀 The market supply curve is formed by adding individual supply curves horizontally, reflecting the total quantity supplied at each price.

Q & A

What is the definition of supply in economics?

Supply refers to the amount of a good or service that sellers are willing and able to sell at different prices.

What factors influence a seller's decision to supply a good?

A seller’s decision is influenced by factors such as the price of the good, opportunity cost, available alternatives, and the seller's personal circumstances (e.g., input costs and outside options).

What is the difference between quantity supplied and the supply schedule?

Quantity supplied refers to the specific amount of a good a seller is willing to sell at a given price. A supply schedule is a table that shows the quantity supplied at various price levels.

How does the supply curve relate to price?

The supply curve typically slopes upward, indicating that as the price increases, sellers are willing to supply more of a good. Higher prices incentivize sellers to produce more because it increases potential revenue.

What is the supply schedule, and how is it different from the supply curve?

A supply schedule is a table that lists the quantity of a good that sellers are willing to supply at different price points. The supply curve is a graphical representation of this data, plotting quantity supplied on the x-axis and price on the y-axis.

How does the number of suppliers affect the market supply?

The market supply is the total supply from all individual suppliers. It is determined by adding the quantity supplied by each seller at every price point. More suppliers typically result in a higher total supply at each price.

What would happen if the price of a good rises significantly?

If the price rises significantly, sellers will generally be more willing to produce and sell more of the good. This results in a higher quantity supplied, as seen in the upward-sloping supply curve.

Why might different suppliers, like Khadijah and Kim, be willing to supply different amounts at the same price?

Different suppliers may have different costs of production or outside opportunities. For example, Khadijah might have lower input costs (like free oven use and cheaper ingredients), but she could also have a high-paying outside job, making her less willing to supply a large quantity of cookies compared to Kim, who has fewer alternatives.

What is the difference between an individual supply curve and the market supply curve?

An individual supply curve shows the quantity that a single seller is willing to supply at various prices. The market supply curve is the sum of the individual supply curves, showing the total quantity supplied by all sellers in the market at each price point.

How do you calculate market supply from individual suppliers’ supply curves?

To calculate the market supply, you add the quantity supplied by each individual seller at each price point. This is done by summing the quantities at each price from all suppliers to determine the total market supply.