Change in Supply
What’s the difference between the change in
quantity supplied and a change in supply?
What causes a change in supply (non-price
determinants)?
How do graphs look when showing a change in
supply?
How do you graph a change in supply?
How is a change in supply
different?
• A change in supply is due to factors other than
just price of a g/s (change in quantity supplied).
– Remember, a change in quantity supply is due to
price of one item.
– This change happens when quantities demanded
increase or decrease at all prices, not just one.
• The supply curve will shift, or move an entire
curve, to the left (decrease in supply) or to the
right (increase in supply)
Supply Curves:
CS
vs
QS
What can cause a change in supply?
(“supply shifters”)
•
•
•
•
•
•
Number of sellers
Changes in cost of inputs (resource prices)
Changes due to disasters and events
Changes in expectations of producers
Technology
Changes in government policy (law)
These are also called non-price determinants
“supply shifters”
• Number of sellers
– Producers enter a market when there may be a profit to make,
and vice versa
– International trade based on trade barriers/freedoms
• Changes in cost of inputs (resource prices)
– Change in cost of factor(s) of production=change in
market supply
– PROFIT is key; lower prod. costs=increase in profits
• Changes due to disasters and events
– Natural disasters can destroy factors of production or
supply
– Historical/international events can affect access to
factors of production or supply
“supply shifters”
• Changes in expectations of producers
– Expectations that future prices will rise or fall can
affect supply
• Technology
– Can reduce amount of labor to produce a good,
lowering costs/increasing productivity, leading to
increase
• Changes in government policy (law)
– Subsidy—cash payment by the government to
producers, aimed at helping producers continue to
operate
• Do not necessarily increase supply
– Excise tax—tax on manufacture/sale of a good (adds
to production cost): causes decrease
REMEMBER!
• Movement along a
supply curve is ONLY in
response to a change in
the price of one good
(quantity supplied)
• Movement to the left or
right of a supply curve is
usually a result of a nonprice determinant
(change in supply)
Gut check!
What is the difference between a change in quantity
supplied and a change in supply?
– Change in Qs is caused by a change in price; a
change in supply is a change in total supply at all
prices, causing a shift of the curve
If there is an increase in the supply at all prices, what
direction will the curve move? Decrease in the
supply?
– Increase: to the right
– Decrease: to the left
What can cause a supply curve to shift or move?
– Supply shifters: number of sellers, technology,
resource prices…