Hi folks, let's jump right in... still in
chapter 3, let'scall this part 2, let's attack
that supply side.  This presentation is
going to go quickly compared to the
demand one, because there's a lot of
parallels, so I hope that you pick it up
free pretty fast. Ok, so when we talk
about supply, supply can be expressed in
a schedule or a table. You can express it
graphically on a curve or you can think
about it as a relationship between
quantity supplied Qs and P, price.   So
just like demand pretty much.. you're just
thinking about this from the perspective
of suppliers, so you're asking at certain
prices how many of the product are they
willing and able to supply.  And if you're
talking about say like sleeves for
tablets at $10 they might be willing to
supply two million of those.  If they're
able to sell it $20 though they might in
fact be willing to provide 4M, and of
course if  the price keeps going up and
up. You'd expect to see that the quantity
that they were willing and able to
supply would continue to go up.
So there's your schedule.  You can express
any of these individual pairings as a
point on a supply curve.  So if we're
thinking about those sleeves and we find
$10, and at $10 they're willing to
produce 2 million,  at $20 they're willing
to produce 4 million,  and at $50 they're
willing to produce 8M.
This is how you're going to get to a 
a Supply curve and of course this supply
curve graphically or in table form is
nothing more than a relationship between
P and the amount that they are willing
and able to supply at that price.  So... we
talked about the law of supply as
essentially price rising and quantity
supplied following it,  or vice versa. 
Price and quantity supplied are
positively related, and of course this
implies just like on our last slide a
positively sloped supply curve.  Okay so
this is your law of supply.
Just like with demand we had movements
and we had shifts.  For supply if we start
thinking about a movement we are talking
about an increase in the price... and what
we noticed was that if the price goes up
you have more and more firms who are
willing and able to supply greater
quantity.  This is your movement.  Now just
like with demand it wasn't always about
just the price of the good.  We're going
to have a whole list of things that will
actually alter the position of this
supply curve, so when we start talking
about altering the position of the
supply curve we're dealing with shifts
once again... and shifts are best thought of,
once again, in terms of left and right.  If
you move a supply curve to the right
this is an increase.  Okay? ...If you move a
supply curve to the left this is a
decrease....that left and right works
equally well supply or demand...  what
we're worried about is once again how
we're moving along this axis (X-Axis). Okay so
what we're dealing with shifts on the
supply curve what are our shifters, or
what are our non-price determinants if
you want to be fancy.  The first one is
the price of inputs and if the price
of any given input that you need to
produce your product goes up right...then
we are going to expect to see that the
supply is going to go down,  because your
profit for any given unit is actually
going to fall.  If you end up spending more
on your inputs, then when you sell your
product you actually are going to end up
bringing home less money... right?  Some of
you in the background might be thinking, 
"oh, but I'm just going to charge the
customer more".  You're not going to do
that if you're in perfectly competitive
situations... you'll just lose all your
customers.
We'll come back to this later. Technology
we're going to assume always increases
supply, because you shouldn't be adopting
a technology unless it actually helps
you lower your costs.  Price of related
outputs... this is a sort of cumbersome way
of reminding you that firms have
multiple options about what they're
going to produce.  So if you're a farmer
and you're out there and you are
thinking about growing wheat, but you're
currently growing barley.... but the price
of wheat has gone up compared to barley, 
then you might start thinking maybe I'm
growing the wrong crop.... maybe I could
make more money in barley??? and in fact if
you can, then you are going to see that
the supply of barley is going to go down.
Number of firms...very similar
to population-- with an increase in the
number of firms we are going to expect
to see that there is an increase in
supply.  And firms have expectations just
like consumers, so if they believe that
the price is going to fall in the future, 
then they're very likely to want to
supply more of it now at the higher
price.   You have to think your way through
some of the expectations, but essentially
this is a very similar list to the one
that we had for consumers on the demand
side.   So let's go ahead and look at a few
examples.
If you see that the price of lumber is
going to go up,  and we are talking about
the market for fences,  wood fences, then
providers of wood fences are going to be
less willing to supply wood fences at
any given price... because of course paying
more for lumber means that they will
make less profit on the fence,  and
therefore they're not going to be
interested in providing them.   You can
also think about technology,  and if you
see that technology improves, then of
course supply has to increase as well.  So
when you come up with a fancy new
process, like the Bessemer process in
steel that they invented in the late
1800s, 
at any given price they are able to
produce a lot more of that steel and
they're going to be willing to do so.
Number of firms-- if you see that there is
a concentration within an industry and
firms are starting to get driven out of
business then very often what we are
going to expect is that supply is going to
fall.   So once again left means decrease....
rightward shifts mean increase ....alright??
do not think up and down,  think left and
right and you're going to be solid.   So let's
leave that alone for right now and when
we come back with our next presentation
will put supply and demand together.
we'll talk about equilibrium.
