Hello Sara: The key to understanding this is found in the verb MADE. There is also a parallel issue in meaning found in the argument for the existence of God, so I will give that first. The argument is that God did not make the Universe from Substance which the Universe is made of (Matter). The argument is that God made the Universe from Nothing. A contradictory argument would be the comparison to the Potter who makes things from Clay. The Potter does not CREATE the Clay. He picks up existing Clay and molds it. In your problem, BY would refer to a person writing or "making" the Stanzas. Thus, the Stanzas are "made--up" BY the author. When we us OF, we refer to the "substance" of the stanzas, which means that the stanzas consist of SHORT PASSAGES. That is like a kind of "matter" or "clay" that the Stanzas are made "of". We could say that the written composition is made "of" long or lengthy compositions. I hope this is clear. If not, ask and I will try to explain more fully.

"Ballads are made up of short stanzas."

In this context, use "made up of".