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Video transcript

we've talked a lot about demand so now let's talk about supply and we'll use grapes as this example will pretend to be grape farmers of some sort so I will start by introducing you and may be able to in purple in honor of the grapes to the law of supply which like the law of demand makes a lot of intuitive sense if we hold all else equal in the next few videos we'll talk about what happens when we change some of those things that we're going to hold equal right now but if you hold all else equal and the only thing that you're doing is you're changing price then the law of supply says that if the price goes up I'll just say P for price if the price goes up then the supply let me be careful the quantity supplied the quantity supplied supplied goes up and then you can imagine if the price goes down the quantity the quantity supplied goes down and you might already notice that I was careful to say quantity supplied quantity supplied and it's just like we saw with demand when we talk about demand going up or down we're talking about the entire price quantity relationship shifting when we talk about a particular quantity demanded we say quantity demanded we don't just say demand and this is the exact same thing for supply we're talking about a particular quantity will be careful to say quantity if we talk about supply increasing we're talking about the entire relationship shifting or either up or down so let's just make sure that this makes intuitive sense for us and I think it probably does let's think about ourselves as grape farmers and I'll make a little supply schedule right over here supply so grape grape supply schedule which is really just a table showing the relationship between all else equal the price and the quantity supplied so let's label some scenarios over here just like we did with the demand schedule scenarios scenarios and then let's put our price over here it's going to be in price this will be in in price per pound per the per pound price of grapes and then this is the quantity produced over time period and whenever we do any of these supply or demand schedules we're talking over a particular time period it could be per day it could be per month it could be per year but that's the only way to make some sense of okay how much what is the quantity per day going to be produced if that's the price so if we didn't say per day we don't know what we're really talking about quantity quantity supplied quantity supplied and so let's just say scenario a scenario a if the price per pound of grapes is 50 cents if it's 50 cents per pound actually let me just do let me just do let me just do round numbers but you get the idea if the price per pound is one dollar let's just say for us we consider that to be a relatively low price and so weõll only will only kind of do the easiest land are our most fertile land where it's easy to produce grapes and maybe the fertile and cheap land so no one else wants to use that land for other things it's only good for growing grapes and so we will we will provide so this is price per pound so per pound and in that situation we can produce one thousand pounds in this year and I've never been a grape farmer so I actually don't know if that's a reasonable amount or not but I'll just go with a thousand pounds now let's take scenario B let's say the price goes up to $2 well now not only would we produce what we were producing before but we might now want to maybe buy some more land land that might have had other uses Nate land that's maybe not as productive for grapes but we would because now we can get more for grapes and so maybe now we are willing to maybe now we're willing to produce two thousand pounds to two thousand two thousand pounds and we could keep going the same same dynamics keep happening so let's say the price if the price were three dollars three dollars per pound now we do want to produce more we'll what maybe we're even willing to work a little harder or plant things closer to each other or maybe I or maybe I'll get even more land involved that otherwise used for other crops and so then I get and then I'm going to produce 2,500 pounds and I'll do one more one more scenario let's say scenario D the price goes to $4 a pound same dynamic I will stop planting other crops use them now for grapes because great prices are so high and so I will produce I will produce two thousand seven hundred and fifty pounds and so we can draw a supply curve just like we were had drawn demand curves so just like and it's the same exact convention which I'm not a fan of putting price on the vertical axis because as you see we tend to talk about price as the independent variable we don't always talk about it that way and in most of math and science you put the independent variable on the horizontal axis but the convention and economics is to put it on the vertical axis so price on the vertical axis so then this is really price per pound per per pound and then in the horizontal axis quantity produce or thousand quantity let me just write quantity produced I'll say in the next year we're assuming all of this is for the next year so next year next year and it's in thousands of pounds so I'll put it in thousands thousands of pounds and so let's see we go all the way from 1000 to close to 3,000 so to say this is one thousand that's one for one thousand this two thousand and that is three thousand and then the price goes all the way up to four so it's one two three and then four so we can just plot these points these are specific points on the supply curve so it would $1.00 we would supply a thousand points a thousand pounds at $1 thousand pounds that scenario a at two dollars two dollars we would supply two thousand pounds to dollars we'd supply two thousand pounds that's scenario B at three dollars we'd supply supply 25 hundred pounds three dollars oh sorry I want to make up see notice I get my axis confused this is price is what we're kind of when we talk about it this way that we're kind of viewing what the thing that's changing although we don't always have to view it that way so let's so at $1 thousand pounds $1 thousand pounds two dollars two thousand pounds two dollars two thousand pounds three dollars not this isn't three dollars this is three dollars three dollars 2500 pounds so right about there that looks it's about 2500 but I want to do it in that blue color so we don't get confused so three dollars 2500 pounds that's about right so this is scenario C and then scenario D at four dollars actually let me let me be a little bit clearer with that because we're getting kind of close so this is 2500 pounds gets us right over here this is scenario C and then scenario D at four dollars four dollars 2750 so 2750 is like right over there so that is four dollars that is scenario D and if we connect them they should all be on our supply on our supply curve so they will all they will all be it will look something like that and there's some minimum price there's some minimum price we would need to supply some grapes at all we wouldn't give them away for free so maybe that's something that minimum price is like over here that just even get started producing grapes so this right over here is what our supply curve would look like now remember the only thing we're varying here is the price so if the price were to change all else equal we would move along this curve here now in the next few videos I'll talk about all of those other things we've been holding equal and what they would do at any given price point to this curve or in general what they would do to the curve