We've talked a lot about demand So now let's talk about supply! And we'll use grapes for this example We'll pretend to be grape farmers of some sort So I'll start by introducing you (and maybe I'll do it 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 and in the next few videos we'll talk about what happens when we change some of those things that we'll 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 and let me be careful the quantity supplied goes up And then you can imagine if the price goes down the quantity supplied goes down And you might already notice that that I was careful to say 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're talking about a particular quantity demanded we say quantity demanded we don't just say demand This is the exact same thing for supply When we're talking about a particular quantity we'll be careful to say quantity If we talk about supply increasing we're talking about the entire relationship shifting either up or down So let's just make sure 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 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... and let's put our price over here and this'll be in price/lb the per pound price of grapes and this is the quantity produced over the 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 OK, what is the quantity per day going to be produced, if that's the price? We didn't say per day... We don't know what we're talking about. Quantity supplied... And so let's just say Scenario A If the price per pound of grapes is 50 cents if it's 50 cents per pound actually let me just do round numbers but you get the idea The price per pound is $1. Let's just say for us we consider that to be a relatively low price . And so we'll only kind of do the easiest land 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 the land for other things it's only good for growing grapes And so we will provide, --so this is price per pound-- In that situation we can produce 1000 lbs 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 it, 1000 lbs. 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 wanna buy some more land land that might have had other uses 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're willing to produce 2000 lbs. And we could keep going the same dynamics keep happening so let's say if the price were $3 per pound now we do want to produce more, maybe now we're even willing to work a little harder, or plant things closer to each other, or maybe I'll get even more land involved than I would've otherwise used for other crops and so then I'm gonna produce 2500 pounds And I'll do one more scenario. Let's say Scenario D. the price goes to $4 a pound Same dynamic, I'll stop planting other crops. And use them now for grapes because grape prices are so high and so I will produce 2750 pounds And so we can draw a supply curve just as we have drawn demand curves 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 an 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 in economics is to put it on the vertical axis. So price on the vertical axis and so this is really price per pound And then on the horizontal axis quantity, produced. Let me just write quantity produced. I'll say in the next year we're assuming all of this is for the next year and it's in thousands of pounds so I'll put it in thousands of pounds. And so let's see we all the way from 1000 to close to 3000 so this is 1000 that's 1 for 1000 that's 2000 and that is 3000 and the price goes all the way up to 4 so it's 1 2 3 and then 4 So we can just plot these points these are specific points on the supply curve. So at $1 we would supply 1000 pounds That's Scenario A. At $2 we would supply 2000 pounds. That's Scenario B. At $3 we would supply 2500 pounds. $3....I am sorry.... See...notice I get my axes confused This is price. This isn't what when we talk about it this way that we're kind of viewing as the thing that's changing although you don't always have to be that way. So $1-1000 pounds, $2-2000 pounds, $3--not this, this isn't $3--this is $3--$3-2500 pounds. So I'll write about that. That's about 2500. I want to do it in that blue color so we don't get confused So $3-2500 pounds. That's about right. So this is Scenario C. And then Scenario D at $4 Actually let me be a little bit clearer with that because we're getting a little close This is 2500 pounds gets us right over here. This is Scenario C. And then Scenario D at $4-2750 So 2750 is like right over there So that is $4. That is Scenario D. And if we connect them, they should all be on our supply curve. So they will all be... it would look something like that. And 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 minimum price is like over here. that just to 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.