The Supply Curve
-
0:13 - 0:17- Now that we've got the demand curve
down, let's move on to the supply curve. -
0:17 - 0:22A supply curve shows how much of a good
suppliers are willing and able to supply -
0:22 - 0:26at different prices. As with the demand
curve, there's a supply curve for every -
0:26 - 0:31good and service. And again the ideas are
the same so let's look at the supply curve -
0:31 - 0:36for oil. We see an intuitive relationship
between price and the quantity supplied. -
0:36 - 0:40As the price goes up, the quantity of oil
that companies are willing to supply -
0:40 - 0:45increases. In this example, in a low
price, $5 per barrel, let's say 10 million -
0:46 - 0:51barrels of oil are supplied per day. At
$20 per barrel, 25 million barrels are -
0:51 - 0:56supplied, and at $55 per barrel, 50
million barrels are supplied. So in -
0:56 - 1:02general, a higher price means a greater
quantity supplied. Let's go deeper and see -
1:02 - 1:08why. Oil exists all over the world but
it's not equally easy to extract. In some -
1:08 - 1:12places like Saudi Arabia, it's really easy
to get oil out of the ground. It's costs -
1:12 - 1:17about $2 a barrel to extract. Oil in the
U. S.like from Alaska is a lot deeper and -
1:17 - 1:22getting out cost more, at least $10 per
barrel. And producing oil from an oil rig -
1:22 - 1:26like the Atlantis rig in the Gulf Coast is
even more expensive. That rig has to -
1:27 - 1:32descend more than a mile underwater before
drilling even begins. When oil prices are -
1:32 - 1:36relatively low the only suppliers that can
turn a profit are those who can get to the -
1:36 - 1:41oil cheaply, like Saudi Arabia. As the
price goes up, other suppliers in Nigeria, -
1:42 - 1:45Russia, and Alaska who have higher
extraction costs starts to become -
1:45 - 1:50profitable so they can enter the market.
As the price gets higher, even the most -
1:51 - 1:55expensive extraction techniques become
profitable. The supply curve slopes upward -
1:55 - 2:00because the only way the quantity of oil
can be increased is to exploit higher and -
2:00 - 2:05higher cost sources of oil.
As the price of oil goes up, the depth of -
2:05 - 2:12the oil wells goes down. With this simple
line the supply curve summarizes the way -
2:12 - 2:17suppliers respond to a change in price
including how suppliers will enter and -
2:17 - 2:22exit the market depending on the price. So
far we've said things like if the price -
2:23 - 2:27goes down, buyers will want to buy more or
if the price rises suppliers will want to -
2:27 - 2:32sell more. But we haven't said anything
about how prices are determined. That's -
2:32 - 2:34the subject for the next video,
Equilibrium. -
2:36 - 2:40If you want to test yourself, click
Practice Questions or -
2:40 - 2:43if you're ready to move on,
just click Next Video. -
2:52 - 2:55Subtitles by the Amara.org community
- Title:
- The Supply Curve
- Description:
-
{'type': u'plain'}
- Video Language:
- English
- Team:
- Marginal Revolution University
- Project:
- Micro
- Duration:
- 02:55
Martel Espiritu edited English subtitles for The Supply Curve | ||
Martel Espiritu edited English subtitles for The Supply Curve | ||
Martel Espiritu edited English subtitles for The Supply Curve | ||
pu phuc edited English subtitles for The Supply Curve | ||
MRU2 edited English subtitles for The Supply Curve | ||
MRUniversity edited English subtitles for The Supply Curve |