Economics Unit 4, Lesson 1
Supply
Change in Supply or Change in Quantity
Supplied
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Objectives
1. Understand the difference between a
∆QS and ∆S.
2. List the reason for a change in QS.
3. Identify the non-price determinants of
supply.
4. Graph a ∆QS and ∆S.
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Profit is what motivates
producers.
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Change in QS
Caused by a
change in the price
of the item. This is
shown by a
movement along
the curve.
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Change in QS
P
S1
P1
P2
Q2
Q
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Q1
Change in Supply
• If something other than the price
changes, we call that a change in
supply.
• Our original supply curve is no longer
valid, so we will shift the entire curve.
• There are several reasons for a change
in supply.
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S2
$
S1
Q
Decrease in Supply
- Shift Left
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$
S1
S2
Q
Increase in Supply
- Shift Right
Change in Supply
1.
2.
3.
4.
5.
6.
7.
Change in government regulations
Change in producer expectations
Change in taxes or subsidies
Change in # of sellers
Change in cost of inputs
Change in technology
Change in other goods’ price
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1. Change in government
regulations
1. Change in government regulations –
This is when the government tells the
producer they must do something.
Example: Tells auto manufacturers
they must have seat belts or air bags in
all cars
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2. Change in producer
expectations
2. Change in producer expectations – This
can be an expectation about price or some
other factor that would influence the cost of
production or the ability of the producer to
produce the item.
Example: If producers think the cost of one
of their inputs may decrease in the future,
they will wait to produce the item.
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3. Change in taxes or subsidies
3. Change in taxes – This would be an
excise tax on production. Taxes on
producers raise the cost of production and
cut into a producers profit, so a new tax will
decrease supply.
Change in subsidies – A subsidy is when the
government pays the producer some
money. This, in essence, lowers the cost of
production and will cause an increase in
supply.
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4. Change in cost of inputs
4. Change is costs of inputs – An increase
in the cost of an inputs will cause profit to
decrease so producers will supply less or
shift left; a decrease in the cost of an
inputs means the producer will get more
profit, and they will then increase supply
or shift the curve right.
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5. Change in technology
5. Change in technology – New
technology allows a producer to lower the
cost of production and will always shift the
supply curve to the right with an increase.
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6. Change in other goods’ prices
6. Change in prices of other goods- This is
other goods that have the same productive
process that a producer could produce.
Example: If you are a farmer (producer) and
you are producing wheat but you hear that the
price of corn at market is going to be higher
than wheat, you will stop producing wheat and
start producing corn.
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7. Change in # of sellers
7. Change in # of sellers – If more sellers
or producers enter the market, supply will
increase and shift right; if sellers leave the
market for some reason, supply will
decrease and shift left.
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TIGGERS – This might help you
remember these reasons.
•
•
•
•
•
•
•
T- ∆ technology
I- ∆ input costs
G- ∆ government regulations
G- ∆ other goods
E- ∆ expectations
R- ∆ taxes or subsidies
S- ∆ # of sellers
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