Hello everyone. In this video introduces you to the concept of supply. Before we understand supply, supply comes from the seller okay. So in addition to supply we also measure quantity supplied. We need to differentiate both of them. Quantity supplied means if you know the price, at that given price how much a producer is willing to sell or willing to produce. That's what we call quantity supplied. That means one single quantity. Whereas supply is, it's an economic model. We keep everything else constant, in that case at different prices uh what are the quantities producer or seller is willing to sell. That combinations represent as supply. That means supply is not a single number... it is represented by supply curve. Whenever whenever you are taking a supply curve, that means that is basically telling what it's supposed to be supply. So how do we show this? Basically, we take quantity supplied on the horizontal axis price on the vertical axis. As price increases quantity supplied also increases. That means supply curve is essentially upward sloping curve. On this supply curve every single point represents a quantity supplied. That means you can see quantity supplied here at a given price. If you know the price that means you can figure it out what should be the quantity supplied. As you move along this curve you will see different prices and different quantities supplied. Now there are some misconceptions or misinterpretations about supply. Let's understand those. Supply, as I said, is an economic model. it should have price and quantities supplied as variables. So it's wrong to say when the price increases supply increases. Instead what we want to say is when price increases quantity supplied increases. The price change we move from one point to another point on the same supply curve without any change in the supply. Now the law of supply. Law of supply means basically price and quantity supplied are positively related okay or directly related. In other words, supply curve is upward sloping. within the supply, we show it two types: one is individual supply, second is market supply. Individual supply means if you take one producer at different prices what are the quantities that single producer wants to produce. Whereas market supply that means all the producers in the market together what are the quantities they will produce at different prices. So individual supply if you take price as you can see as the price changes quantity supplied is changing. If you show them in terms of the graph that's what gives us supply curve. Change in quantity supplied is movement along the supply curve. That means the reason here is simply change in the price. Whereas change in supply that means an entire shift in the supply curve. When you say shift in the supply curve the reason comes something other than the price is actually changing. The way we try to show it is we show quantity supplied here price here the supply curve is something like this. Moving towards the right this is what we called increase. Don't take it upwards okay. So that's wrong to say. Moving towards left you're basically saying that's a decrease okay. So going towards right is increase, going towards left is decrease. Why we choose that way because at different prices we're seeing more quantities being purchased sorry produced. That's what we show it as uh increase in the supply. Another way of showing the same concept here if you see on s1 moving from one point to other point is change in quantity supplied. if you're moving from s1 to s2 or s1 to s3 that is basically change in supply. Going to s2 is increase going to s3 is a decrease in supply. we want to understand what are the reasons for change in supply or what is causing shift in the supply curve okay. So first one, we have to look at is change in the prices of the resources. okay. So when price of resources increases, cost of production increases, that will have a negative effect on the supply. That means it basically causes shift to the left. Second thing is advances in production technology. If production technology improves able to produce at a lower cost causes the supply to actually increase as well. Taxes and subsidies in production. Taxes will have negative effect on the supply causing it to shift to the left. Whereas subsidies will have positive effect on the supply. Fourth one is number of sellers. More sellers in the market that means higher the supply. Fifth one producers expectation about the future prices. If producers expect in the future the prices are going to increase, that means they withheld the quantity causing current supply to decrease and of course vice versa. If producers expect future price are going to drop, they may dump all the quantity today causing the supply actually to increase. Next thing is same as in our demand side. in the supply side or production side also we have related goods in production. When we call substitutes in production, that means you're using the same resources to produce two different goods. That means if you have a piece of land you can either produce wheat or you can produce corn. If you're producing wheat that means is you are giving up the production of the corn. So if price of one good increases, you start producing more of that good. That causes decrease in the supply of the other good and vice versa. Next thing is complements in production. We call them as byproducts. That means you're producing one good, the other good actually comes as a byproduct okay. So you're not using any additional resource your good or second good is coming essentially as free. in this case if price of one good increases, the supply of other good automatically increases because you start producing more of the first good given the supply curve is upward sloping causing the production of other good to increase as well.