- [Instructor] We're going to continue our discussion
on the law of supply
and in particular in this video
we're gonna get a little bit deeper
to make sure we understand the difference
between a change in supply
and I'm just using the Greek letter delta here
for shorthand for change in supply
versus a change in quantity supplied
and just as a bit of review,
we've talked about it in other videos,
supply is referring to the entire supply curve
and this curve right over here
has the typical shape of a supply curve
following the law of supply.
At low prices, suppliers would provide low quantities
and at higher prices,
suppliers would provide higher quantities,
so a change in supply would be a shift
in this entire curve,
so for example, if you were to go from this curve,
let's call this S1 and we were to have a shift
to the right,
this right over here would be a change in supply,
so we'd call this S2
and we would have this shift,
you could view it as to the right
or to the right and down,
so this would be our change in supply.
Likewise, you could have a change in supply the other way
where you go to the left
and up depending on how you want to view it
and so, this would be,
we could call that supply curve three.
These would all represent shifts in supply
or changes in supply.
When we talk about quantity supplied,
we're talking about shifts along one of these curves,
so for example, at some price,
so let's say we have this price P1 right over here,
associated with that price
we would have some quantity supplied,
we have some quantity supplied.
Let's call it quantity supplied one
and then let's say for some reason,
we have a shift in price
with the market forces not changing
from a supplier's point of view
and so, let's say we go to price two,
let's say we go to price two,
we would shift along that same curve,
the curve itself wouldn't have shifted
and so, then you have quantity supplied two,
so change in supply is a shift of the curve
to the left and up or to the right and down
versus a change in quantity supplied
is moving along the curve
and the associated quantities.
Now, with that out of the way,
let's do some tangible examples
and think about would it result in a change
in supply or a change in quantity supplied?
So, let's say that the government decides
that gas prices are too high
and so, they institute a price cap
and we're gonna talk much more about price caps
in future videos
but a price cap might just say,
and let's say that price cap
is below the current price.
So, let's say the current price is at P2
and that the price cap is at P3,
so the government says,
no one is allowed to charge more than P3 for gasoline.
What would that result in?
Would that result in a change in supply
or a change in the quantity supplied?
Well, this is a classic case
of a shift along a supply curve,
the price was there before,
now it shifts here and so, now we're going to have
a different quantity supplied,
so this would be quantity supplied three,
so this is a change in quantity supplied
and in this case, the change in quantity supplied
would go down assuming that the price cap
is below what the price was before the price cap.
Now, let's give another scenario.
Let's say that the price of refining gas goes up.
Price of refining goes up.
What would that do?
Would that be a change in supply
or a change in quantity supplied?
And pause this video to think about it.
Well, this is something that would increase the cost
of producing gasoline
which is refined from oil across the board
regardless of what price we're at,
so this would be a general shift,
this would be a change in supply
and the entire supply curve,
think about which way it would shift,
think about it from a supplier's point of view.
At a given quantity,
so let's say we're at this quantity right over here,
at a given quantity,
they would now want to charge a higher price
and it doesn't apply to just that quantity,
it could be this point in the curve,
this point in the curve, this point of the curve,
they'd want to charge a higher price
to make up for the fact that refining
is now more expensive
and so, this would be a shift,
you could view it up or shift upward
and to the left.
You could also view it the other way.
At a given price,
suppliers would want to provide less quantity
because they need to make up the fact
that they're paying more for refining that gasoline
and so, you could view that as a shift to the left
or a shift of up and to the left
and so, that would be in that direction,
we're kind of shifting like that
and then of course we could talk about a scenario
that goes the other way.
Well, let's say that the property tax
in the entire market,
property tax on gas stations
goes down,
so in theory, if the property tax goes down,
the cost of running a gas station goes down
and this is for everyone in the market,
not just one player in the market
and so, they might for a given price
be able to supply more of a quantity
or for a given quantity
be able to lower the price.
Either way you could imagine shifting
from S1 to something that looks like S2,
going down and to the right
and so, once again,
this would be a change in supply
because you would have a shift regardless
of what price and quantity supplied
you are actually at.