Shifts in the Supply Curve

eleanor.adamandi
Note by , created almost 6 years ago

This note explains how and why the supply curve can shift to the right or to the left, and how this impacts on the level of supply

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jackexamtime
Created by jackexamtime almost 6 years ago
eleanor.adamandi
Copied by eleanor.adamandi almost 6 years ago
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Page 1

Like the Demand Curve, the Supply Curve Can Shift to Both the Right and the Left 

It occurs when any non-price determinant of supply changes (when price changes, there is a movement along the supply curve, rather than a shift in it)It results in a new supply curve, either to the left or the right of the old supply curve

A Shift to the Right

A Supply Curve will shift to the right when any of the following things occur:A rise in priceA fall in price of other goodsA decrease in the costs of productionAn increase in technological advancement Increase in government subsidiesA shift to the right results in the supply curve moving outward, resulting in an overall increase in supply at every price - this will be very important when we go on to look at equilibrium of demand and supply.

A Shift to the Left

A Supply Curve will shift to the left when any of the following things occur:A fall in priceAn increase in price of other goodsAn increase in the costs of productionTechnology no longer being availableA shift to the left results in the supply curve moving inward, meaning that less quantity will be supplied at each price - this will be very important when we go on to look at equilibrium of demand and supply.This diagram shows how shifts in the supply curve, both left and right, can affect the quantity supplied at a given price

Take the Supply Curve "S" as our starting pointWhen S shifts to the right, to "S1" (increase in supply), we see how the quantity supplied at price P has increased from Q to Q1Conversely, when S shifts to the left, to "S2" (decrease in supply), we see how the quantity supplied has gotten closer to 0 on the X axis than the original "Q", symbolising a reduction in quantity supplied then the curve shifts to the left

Shifts in the Supply Curve