Overview
This lecture explains the difference between a change in supply and a change in quantity supplied, using supply curves and real-world examples.
Law of Supply Review
- The law of supply states that at higher prices, suppliers provide higher quantities, and at lower prices, they provide lower quantities.
- The supply curve represents the relationship between price and quantity supplied for a good.
Change in Supply vs. Change in Quantity Supplied
- A change in supply refers to a shift of the entire supply curve, either to the right (increase) or left (decrease).
- A shift to the right/down means supply increases; to the left/up means supply decreases.
- A change in quantity supplied means moving along the same supply curve due to a price change.
Example Scenarios
- If the government imposes a price cap below the current price, it leads to a movement along the curve (change in quantity supplied), lowering the quantity supplied.
- An increase in the cost of refining gas increases production costs for all suppliers, shifting the entire curve left/up (change in supply).
- A decrease in property taxes for gas stations lowers costs for all suppliers, shifting the supply curve right/down (change in supply).
Key Terms & Definitions
- Supply Curve — a graph showing the relationship between price and quantity supplied.
- Change in Supply — a shift of the entire supply curve due to factors other than price.
- Change in Quantity Supplied — movement along the supply curve caused by a change in the good's price.
- Price Cap — a government-imposed limit on how high a price can be charged.
- Production Costs — expenses involved in making a product, affecting supply.
Action Items / Next Steps
- Review how external factors shift the supply curve versus movements along it.
- Prepare to discuss price controls (like price caps) in the next lecture.