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 non-price 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…