Determinants of a Firm's Supply Curve Video Lecture | Economics for JAMB

okay so today we're going to talk about
the determinants of supply these are
very similar to how the determinants of
demand work they work in just about the
same way we're still using the law of
supply just like we're using the law of
demand before they're just six new
things that you have to know ok so the
law of supply again states that if only
the price of the good changes we just
have a change in supply you're just
following the law of supply excuse me
you just have a change in quantity
supplied so again this is our supply
curve here and if the price of this good
changes we're just moving along that
curve we're just moving from one point
to the next the same set of
circumstances is still the same so
remember ceteris paribus everything else
being the same so nothing else is
different we're just moving along the
curve however if we have a new curve
then we have a change in supply so
changes in supply happen when anything
but the price of that good changes so
again the change in quantity supplied
just moving along the curve a change in
supply is when the whole curve moves
supply refers to the whole curve so if
only the price of the good changes you
have changing the quantity supplied not
the supply itself the supply is the
whole set of price quantity combinations
reflected by that curve
okay so changes in supply happen only if
something else in the marketplace has
changed not the price if the price
changes you're just following that curve
what the heck makes up the price of a
good though well we talked about those
costs of production there's all sorts of
different things that make a good cost
what it does that make the you know the
thousand-dollar tablet that I'm
recording this lecture on cost a
different amount they and the you know
two dollar stylists that I'm using to
touch the screen so any of that stuff if
the the input costs or anything going
into the production of a good change
though then we have a change in supply
also a lot of students are often
confused by the market prices of goods
so I'm going to refer to prices changing
yes with something like an iPad or a car
or anything like that this you know the
seller so this was made by microsoft
microsoft could decide they're going to
charge a thousand dollar for surface to
pros however they also have to deal with
market conditions that helped to create
a price and as we're going to learn with
equilibrium pricing shortly buyers and
sellers come together to create the
price so if people weren't willing to
buy microsoft surface to pros for a
thousand dollars microsoft would either
be selling a smaller quantity of them or
they would have to change their so while
the other probably just if nothing
changed with their cost of production
they would just be selling a smaller
quantity so so it moves along between
consumers and producers coming together
at whatever price they agree is the
number that should be produced you know
and this is just a bunch of independent
people making their own choices then we
come to that price these example are
going to more sense to you however if
you think of something like gasoline all
gasoline is the same these goods are
called commodities something where it's
all the same and there is a market price
so a lot of commodities will have
you know you know like agricultural
products gasoline something like that
where there's a market price you can
look it up in the newspaper you know
where the oil prices for today what's
the price for pork bellies or for bushel
wheat and so then it's really really
clear what makes up that price that you
know people are price takers the
suppliers are price takers not price
makers a lot of the goods that you buy
are made by price makers Neil Microsoft
can set the price for this tablet but
they are still operating within a market
it's just going to make things a little
bit more confusing for if you think of
goods like that okay so a note on ships
just like with demand supply can
increase or decrease which mean the same
thing as saying it can shift left or
right I often use those terms right and
left just to make sure that nobody gets
confused so here we could have a shift
right from s1 to s2 that's the same
thing as an increase in supply we have a
shift left from s1 to s3 that's the same
as a decrease in supply however simple I
can never ever ever shift in or out this
one especially with supply people want
to say that it's shifting out its or
it's going it's going up Oh up and down
yeah that's I'll add that on there
supply cannot shift down this this is
not the way that it can shift it cannot
go down like that it's going right or
left because we're following a price so
think of it think of it in terms of
right-to-left not up and down okay so
onto the determines so first number of
suppliers this one is pretty simple when
you think about it if there are more
suppliers of the good they're gonna be a
greater quantity there's me a greater
supply of that good there's going to be
more of it on the market place back in
the early days of tablets when I think
you know lenovo maybe which is like a
japanese computer company was about the
only one making tablets there weren't
very many of them available but today
there's all sorts of suppliers of
tablets so you can find all sorts of all
sorts of tablets on the market there is
a greater greater supply of tablets
altogether and you put all those tablets
that are on the market together it's a
greater supply so again which direction
is the shift you'd better not tell me up
or down or I will cry myself to sleep
tonight we have a shift here right you
could also call this an increase in
supply okay next producer expectations
soham producer expectations has to do
with if producers think that prices or
the demand for a good is going to go up
or down so what do they think is going
to happen in the marketplace so the
example I drew here is for hybrid cars
back in two thousand seven when I was
starting I just graduated high school
prices that summer for gasoline went up
higher than they had ever been before or
maybe was 2008 I don't know so they went
up about four dollars a gallon for like
the first time ever and people got
freaked out and suddenly you started to
see all sorts of hybrid cars entering a
market place for us previously there had
been only on Toyota Priuses basically so
this is a greater supply of hybrid cars
because producers expect the gas prices
are going to keep going up so again a
gas gas would be like complimentary good
and that
rumors are going to demand more hybrid
cars and therefore prices will be able
to go up for hybrid cars because people
are going to actually want okay next
technology technology affects production
costs obviously so here I drew some
curves as technology changes so will the
costs of production usually this is
going to be in terms of shifts right
there are rarely reductions in
technology unless a massive computer
virus happens or something so for
instance with wheat and this is a great
example precision a market price if a
new sealed and a new seat excuse me
enters the market which new seeds are
being invented no genetically engineered
and also just on now you know like
Mendelian genetics eyes into print into
existence they can make make more wheat
than previous generations of seeds so if
a new seat enters the marketplace you're
going to have a greater supply because
farmers are more willing to supply that
amount at any given price level so if we
is I have no idea how much we cost but
say it's four dollars a bushel they are
suddenly now willing to supply a greater
quantity at four dollars a bushel then
they were before because they can
produce it for cheaper next input costs
this one makes Thomas on Stu changes in
the price of goods that go into other
goods are going to affect the price that
excuse me are going to affect to supply
of that good so whether you know it or
not one basically the major component of
plop of plastic is oil so oil is an
input in plastic if the price of oil
goes up producers are going to be less
willing to supply plastic at any given
price level they're not going to want to
produce as much of it so which direction
is this curve shifting again don't give
me a rose up and down that is way way
incorrect this is either left
or a decrease in supply next government
action government action is all sorts of
things that the government can do with
the economy the government has a huge
gigantic role in the economy just as we
talked about with types of economies so
anything that the government does like
different kinds of taxes these could be
taxes put on are taken away from certain
industries subsidies so cash payments to
any sort of an industry which happen a
lot more than you might realize
regulations on industries you know like
epa fuel regulations on auto makers or
hear my example is a carbon tax on
electricity providers so a lot of people
have proposed a carbon tax meaning you
have to pay for carbon emitted that's
carbon is like stuff from burnt burnt
fossil fuels that gets in the ozone
layer and produces global warming so if
you text that electricity producers
would have to pay more money to the
government essentially and they will be
less willing to supply electricity at
the same price for you they would not
want to supply electricity for the same
price or they would want to supply a
greater and lesser quantity of it
because it costs them more to bring that
to you these could also include
regulations you know like workplace
safety regulations that obviously
affects the cost of doing business any
any sort of these examples could affect
our government action any time in a
question I mentioned the government
doing something or taxes or subsidies or
policies or anything like that you know
it's got to be government action the
government also does tax subsidies to a
lot of industries that would also so all
the stuff in green here is text subsidy
that would be a shift which direction
again yes that's a shift right or an
increase in supply not the shift downs
certainly not down okay and I think this
is the last one labor productivity labor
productivity this one also pretty simple
how productive are you workers if your
workers are super productive if you can
get twice as much done then you're then
you could before with the same number of
workers you're going to be more willing
to supply your product it's because
you're paying your payroll is the same
you have more productive workers the
output is going to increase with the
same number of workers same production
cost etcetera early screw your payroll
oftentimes this goes hand in hand with
technology summer for instance workers
today are really productive because they
can use computers and technologies of
all sorts of different fields but
sometimes it can operate independently
like for instance when Henry Ford
started paying his workers five dollars
a day back in 1914 which was you know a
huge wage back then he had much happier
harder working workers who wouldn't you
know take sick days and not show up and
stuff like that so he was able to
increase his supply because he could
count on people being there and working
hard every day that's it for the
determinants of supply we'll put them
together soon with demand to make
equilibrium but again I just want to
stress to you that what happens to
supply of the market price of a good
changes so you know if the price of a
good the going rate for something
changes nothing only the quantity
supplied changes so this is going to be
really really important when we put this
together with demand where if one of
these things ships if demand ships you
don't have a change in supply to you
just have a change in quantity supplied
using moving along and supply curve or
vice versa if anything else goes on in
the marketplace like the input costs
labor productivity that stuff we just
talked about if it's a new set of
circumstances it ceteris paribus is no
longer the case we have a new supply
you