a

Difference between Individual and Market Supply

hi there welcome to an AAS level of

microeconomics topic video looking at

the difference between individual supply

and market supply the key difference is

this that individual supply refers to

the supply capability individual

producer in the market at each price

level whereas market supply is the sum

of the individual supply schedules or

individual supply curves of the all the

producers in the industry there was

market suppliers fill out the

aggregation of the supply schedules of

all of the individual producers so

supply is the quantity of a good or

service that producers are willing and

able to bring to the market the given

price in a given time period and the

basic law of supply be it mass

production of beers or chocolates or

motor cars or Airlines is that there's

the price of the product goes up

typically businesses to expand their

production in the market to meet demand

so both the individual and the market

supply curve show a relationship

normally a positive relationship between

the market price and how much firms are

willing and able to sell of course the

key to understanding this is the nature

of cost in the market cost normally

arise as supply increases and also the

profit motive that producers are

motivated by supplying products to the

market generating a revenue getting the

best price they can for their product

and earning a return for the owners so

typically for example the market supply

curve and the individual supply curve

for a product slopes up widths from left

to right if the price of coffee goes up

then coffee producers other things being

the same might try to expand their

production to meet demand of course the

change in the price of coffee causes a

movement along the supply curve other

factors the so called conditions of

supply caused a shift in the supply

curve the market supply is the

aggregation of the total of supply

bought to the market by producers at

each price and to calculate market

supply we work out the the sum of the

individual therm supplies to

here's a simple example price 10 pounds

in the market for American supply 30

from cecum supply fire but Furby may may

have high costs and may not be willing

and able to supply anything to the

market at price 10 so the market

suppliers 35 Furby comes into the market

at price 20 both firma and firmb see

supply more and you can see that the

market supply get up to 70 when the

price rises to 20 so market supply is

simply the horizontal sum of what firms

are willing and able to bring to the

market at a given price key revision

point key evaluation point is a supply

is not necessarily the map that's

actually sold because of course there

may be some stocks maybe the current

level of demand is less than the current

level of production so that's market

supply of course there many many factors

that could cause a shift in both the

supply of an individual producer and the

supply of producers as a whole in the

market the keys aren't understanding

suppliers to understand the changing

nature of of costs wouldn't unit cost go

up supply falls when unit costs go down

for given price producers could supply

more many factors affect supply the

exchange rate affects the price of

components of more materials production

technologies should normally shift this

if I go out with the number of producers

in the market will affect the market

supply as new firms come in the market

supply will shift out oftentimes supply

affected by the climatic conditions so

extreme weather events can of course

hamper supply beat drought or flooding

tsunamis and earthquakes etc and

governments in theory of course can

intervene in markets and affect supply

India attacks on a producer causes an

image shift of supplier subsidy causes

an outward shift regulations which

increase cost can cause an inward shift

these are some of the key causes of

shifts in the market supply of a product

well to illustrate the difference

between individual and market let's take

a fascinating industry then sure it's

growing pretty quickly

particularly in the UK and especially in

the United States that craft beer

industry I'm giving you this

presentation I really warm summer's day

and I could do with a beer but I'll

finish my presentation first my craft

beers are produced typically by small

independent Brewers

so they don't necessarily have the big

economies of scale of the industrial

beer conglomerate businesses but they

use a lot of hops and particularly have

a distinctive taste am i selling you

this okay craft beers typically produced

by small producers so they'll be

affected by supply conditions one of

which is the price of hops there's an

article from The Guardian just a few

days ago saying that the the price of

hops is rising they very quickly there's

been a supply shortage and because craft

beers use more hops than normal lagers

that's going to affect their supply

conditions quite adversely and the

production may stall because they run

out of hops to use generally speaking

the craft beer industry in the world has

grown very quickly this chart shows the

countries in the world with the most

craft brewers in other states way out

ahead but the UK comes in second with

over 700 craft beer makers including

businesses such as buddha' so in fact in

the UK the market supply of craft beer

has increased quite rapidly year-on-year

and one way of measuring it is to think

about the industry supply the production

volume as you can see it's been growing

pretty strongly that's both individual

producers supplying more beer to meet

demand and of course the arrival

emergence of new producers into the

market individual and market supply

quite an important distinction to make

and hopefully this video has helped to

explain it to you thank you