SUPPLY
Factors that shift supply
TODAY’S AGENDA
Objective:
To identify the factors that
shift supply and which direction the
curve shifts.
Essential
Skill: To explicitly assess
information and draw conclusions.
CHANGE IN QUANTITY SUPPLIED
Price (per unit)
S0
B
$15
A
Change in quantity
supplied (a
movement along
the curve)
1,250
1,500
Quantity supplied (per unit of time)
SHIFT IN SUPPLY
Price (per unit)
S0
$15
A
S1
B
Shift in Supply
(a shift of the
curve)
1,250
1,500
Quantity supplied (per unit of time)
“ROTTEN”
NON-PRICE DETERMINANTS
OF SUPPLY:
FACTORS THAT SHIFT THE
SUPPLY CURVE
“R” IS FOR
RESOURCE
Changes in resource
prices or input costs
Elements of nature and political
disruptions
“O” IS FOR
OTHER
Change in Prices
of other goods
produced and
offered for sale
“T” IS FOR
TECHNOLOGY
Changes in
technology
“T” IS FOR
TAXES
Changes in taxes
and subsidies
“E” IS FOR
EXPECTATIONS
Change in expected
future prices, (producer)
expectations
“N” IS FOR
NUMBER
Change in the number of
suppliers in the market
Elements of nature and political
disruptions
NON-PRICE DETERMINANTS OF SUPPLY
 Changes in resource prices or input costs
 Elements of nature and political disruptions
 Change in Prices of other goods produced and
offered for sale
 Changes in technology
 Changes in taxes and subsidies
 Change in Expected future prices (producer)
expectations
 Change in the number of suppliers in the market
 Elements of nature and political disruptions
QUICK TIP

Any factor that increases the
cost of production
decreases supply

Any factor that decreases
the cost of production
increases supply
COSTS INCREASE; PROFITS DECREASE
 Government
 Natural
regulations increase cost
disasters increase cost
 Expectations
about future prices increase cost
(put in inventory)
 Increased
 Costs
taxes increase cost
of inputs increase
COSTS DECREASE; PROFITS INCREASE
 Technological
 Number
advances
of firms increase
 Subsidies
 Future
 Taxes
 Cost
price decrease
decrease
of inputs decrease