Objectives
LESSON 5.2
Shifts of the Supply Curve
 Identify the determinants of supply, and
explain how a change in each will affect
the supply curve.
 Contrast a movement along the supply
curve with a shift of the supply curve.
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Key Terms
LESSON 5.2
Shifts of the Supply Curve
 movement along a supply curve
 shift of a supply curve
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Determinants of Supply
Five determinants of market supply
(other than the price of the good)
 Cost of resources used to make the good
 Price of other goods these resources could
make
 Technology used to make the good
 Producer expectations
 Number of sellers in the market
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Changes in the Price
of Resources
Any change in the costs of resources used to
make a good will affect the supply of the good.
An increase in supply means that producers
are more willing and able to supply more goods
at each price.
An increase in the price of a resource will
reduce supply, meaning a leftward shift of the
supply curve.
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Changes in the Prices
of Other Goods
A change in the price of another good
certain resources could make affects the
opportunity cost of making a particular
good.
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Changes in Technology
Discoveries in chemistry, biology,
electronics, and many other fields have
created new products, improved existing
products, and lowered the cost of
production.
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Changes in
Producer Expectations
Any change that affects producer
expectations about profitability can affect
market supply.
An expectation of higher prices in the
future could either increase or decrease
current supply, depending on the good.
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Changes in the Number of
Sellers in the Market
Government regulations may influence
market supply.
Any government action that affects a
market’s profitability, such as a change in
business taxes, could shift the supply
curve.
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An Increase in the
Market Supply for Pizza
S
$15
S'
Price per pizza
g
12
h
9
6
3
0
12 16 20 24 28
Millions of pizzas per week
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An Decrease in the
Market Supply for Pizza
S''
Price per pizza
$15
i
12
S
g
9
6
3
0
12 16 20 24 28
Millions of pizzas per week
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Movements Along a Supply Curve
Versus Shifts of a Supply Curve
A change in price, other things constant,
causes a movement along a supply
curve from one price-quantity
combination to another.
A change in one of the determinants of
supply other than the price causes a
shift of a supply curve, changing
supply.
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