Transcription
Hello. So, we now analyze the other side of the market, which is the 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, an 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 its 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 will 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, an increase in the price of the inputs will reduce the supply, and therefore the supply curve will shift up and to the left.
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 one, 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 two. 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.
So, the other determinant is the price of related goods. So, remember when we are looking at this, we distinguish between substitute goods 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 one, if we assume that a second firm is producing two 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 Fanta as a less profitable business, and therefore the fabled China resources away from some of the resources away from the production of Fanta 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 S two. As stated earlier, and the increase in the price, and increase in the price of Fanta will cause the firm's to supply more Fanta 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 minimum to increase you tomorrow, it means as a firm, you hold back all the minimum, 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 ks one, 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 S one, 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 the 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 ks one, for 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 three, thirty 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 three, twenty-five 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.