There
are
two
major
categories in the changes in
the supply curve - movement
along the supply curve and
shifts in the supply curve.
These changes are influenced
by the changes in the factors
affecting the supply of a
commodity.
The movement along the supply curve is
brought about by changes in the price of
the commodity. An increase in price will
increase the quantity supplied as shown by
movement towards northeast along the
supply curve. On the other hand, a
decrease in the price of the commodity
will cause a decrease in quantity supplied
as shown by the movement toward the
southwest along the supply curve.
The graph shows the movement along the supply
curve brought about by an increase in the price
of the commodity. At price 𝑃1 , coordinate A along
the supply curve S will give us the quantity
supply which is denoted by 𝑄1 . If the price
increases to 𝑃2 , coordinate B along the supply
curve will give us the increased quantity supply
at 𝑄2 , Thus, as the price of the commodity
increases the amount of quantity supplied
increases as well as shown by the movement of
along supply curve S from point A to point B.
The shift in the supply curve, on the other hand, is
caused by changes in the other factors affecting
supply except the price of the commodity. For
example, an increase in the minimum wage can
increase the cost of production and will shift the
supply curve to the left. As the supply curve shifts
to the left, the supply will declined since all
possible quantities to be supplied decreases at all
alternative prices. Similarly, an imposition of an
additional business tax by the government will
likewise lower the supply as the supply curve
shifts to the left.
On the other hand, a bountiful harvest can
shift the supply curve to the right. At
alternative prices the firm can now produce
and supply at higher levels of output. In both
examples, the initial positive and direct
relationship between the price of the
commodity and the quantity supplied is
maintained. However, the positive or
negative effects of the other factors on the
supply are illustrated by shifting the supply
curve to the right or to left, respectively.
The graph shows the shift in the supply
curve brought about by an imposition of
additional sales tax per unit of output. At
price 𝑃1 , the coordinate C along the initial
supply curve 𝑆1 will give us the quantity
supply which is denoted by 𝑄1 . With the
imposition of an additional sales tax which
increases the cost of production, quantity
supplied decreases to 𝑄11 at price 𝑃1 . We will
label this change as coordinate f (𝑄11 , 𝑃1 ).
In the same light if the price decreases to 𝑃2 ,
coordinate B along the supply curve 𝑆1 will give
us the decrease in quantity supply at 𝑄2 . The same
price 𝑃2 quantity supplied will further decrease to
𝑄22 with the imposition of a tax. We will label this
change as coordinate g(𝑄22 ,𝑃2 ). Thus, if we
connect coordinates g and f we form a new
supply curve 𝑆2 . Thus, the supply curve has
shifted to the left from 𝑆1 to 𝑆2 as their production
costs increase as a consequence of the imposition
of an additional sales tax.
The shift in the supply curve, on the other hand, is
caused by changes in the other factors affecting
supply except the price of the commodity. For
example, an increase in the minimum wage can
increase the cost of production and will shift the
supply curve to the left. As the supply curve shifts
to the left, the supply will declined since all
possible quantities to be supplied decreases at all
alternative prices. Similarly, an imposition of an
additional business tax by the government will
likewise lower the supply as the supply curve
shifts to the left.