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Current time:0:00Total duration:6:15

Change in supply versus change in quantity supplied

AP.MACRO:
MKT‑2.C (LO)
,
MKT‑2.C.1 (EK)
,
MKT‑2.D (LO)
,
MKT‑2.D.1 (EK)
AP.MICRO:
MKT‑3.C (LO)
,
MKT‑3.C.1 (EK)

Video transcript

we're going to continue our discussion on the law of supply and in particular in this video we're going to get a little bit deeper to make sure we understand the difference between a change in supply and I'm just using the Greek letter Delta here for shorthand for a change in supply versus a change in quantity quantity supplied and just as a bit of a review we've talked about it in other videos supply is referring to the entire supply curve and this curve right over here has a typical shape of a supply curve following the law of supply at low prices suppliers would provide low quantities and at higher prices suppliers would provide higher quantities so a change in supply would be a shift in this entire curve so for example if you were to go from this curve let's call this s1 here and we were to have a shift to the right this right over here would be a change in supply so that we'd call this s2 and we would have this shift you could view this to the right or to the right and down so this would be our change in supply likewise you could have a change in supply the other way where you go to the left and up depending on how you want to view it and so this would be we could call that supply curve 3 these would all represent shifts in supply or changes in supply when we talk about quantity supplied we're talking about shifts along one of these curves so for example at some price so let's say we have this price p1 right over here associated with that price we would have some quantity supplied we have some quantity supplied let's call that quantity supplied 1 and then let's say for some reason we have a shift in price with the market forces not changing from a suppliers point of view and so let's say we go to price - let's say we go to price - we would shift along that same curve the curve itself wouldn't have shifted and so then you have quantity supplied - so a change in supply is a shift of the curve to the left and up or to the right and down versus a change in quantity supplied is moving along the curve and the associated quantities now with that out of the way let's do some tangible examples and think about what it results in a change in supply or a change in quantity supplied so let's say that the government decides that gas prices are too high and so they Institute a price cap and we're going to talk much more about price caps in future videos but a price cap might just say and let's say that price cap is below the current price so let's say the current price is at p2 and that the price cap the price cap is at p3 so the government says no one is allowed to charge more than p3 for gasoline what would that result in would that will result in a change in supply or a change in the quantity supplied well this is a classic case of a shift along a supply curve the price was there before and now it shifts here and so now we're going to have a different quantity supplied so this would be quantity supplied 3 so this is a change in quantity quantity supplied and in this case the change in quantity supplied the quantity supplied would go down assuming that the price cap is below what the price was before the price cap now let's give another scenario let's say that the price of refining gas goes up price of refining goes up what would that do would that be a change in supply or a change in quantity supplied and pause this video to think about it well this is something that would increase the cost of of producing gasoline which is refined from oil across the board regardless of what price were at so this would be a general shift this would be a change in supply and the entire supply curve to think about which way it would shift think about it from a a suppliers point of view at a given quantity so let's say we're at this quantity right over here at a given quantity they would now want to charge a higher price and so you would have and this it doesn't apply just of that client it could be this point in the curve this point a curve this point of the curve they'd want to charge a higher price to make up for the fact that refining is now more expensive and so this would be a shift you could view it up or shift upward and to the left you could also view it the other way at a given at a given price suppliers would want to provide less quantity because they need to make up the fact that they're paying more for that for refining that gasoline and so that you could do that as a shift to the left or shift of up and to the left and so that would be in that direction we're kind of shifting like that and then of course we could talk about a scenario that goes the other way let's say that the property tax property in the entire market property tax on gas stations and gas stations goes down so in theory if the property tax goes down the cost of running a gas station goes down and this is for every one in the market not just one player in the market and so they might forgive in price be able to supply more of a quantity or for a given quantity be able to lower the price either way you could imagine shifting from s1 to something that looks like s2 going down and to the right so once again this would be a change in supply because you would have a shift regardless of what price and quantity supplied you are actually at
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