Watching this resources will notify you when proposed changes or new versions are created so you can keep track of improvements that have been made.
Favoriting this resource allows you to save it in the “My Resources” tab of your account. There, you can easily access this resource later when you’re ready to customize it or assign it to your students.
The supply curve depicts the supplier's positive relationship between price and quantity.
Distinguish between shifts in the supply curve and movement along the supply curve
A change in the price of a good or service, holding all else constant, will result in a movement along the supply curve.
A change in the cost of an input will impact the cost of producing a good and will result in a shift in supply; supply will shift outward if costs decrease and will shift inward if they increase.
A change in the expected demand for a good or service will result in a shift in supply; supply will shift outward if enthusiasm is expected to increase and will shift inward if there is an expectation for consumers preferences to change in favor of an alternate good or service.
If the price of the good or service changes, all else held constant such as price of substitutes, the supplier will adjust the quantity supplied to the level that is consistent with its willingness to accept the prevailing price. The change in price will result in a movement along the supply curve, called a change in quantity supplied, but not a shift in the supply curve. Changes in supply are due to non-price changes.
Non-price changes and shifts of the supply curve
If production costs increase, the supplier will face increasing costs for each quantity level. Holding all else the same, the supply curve would shift inward (to the left), reflecting the increased cost of production. The supplier will supply less at each quantity level.
If production costs declined, the opposite would be true. Lower costs would result in an increase in output, shifting the supply curve outward (to the right) and the supplier will be willing sell a larger quantity at each price level. The supply curve will shift in relation to technological improvements and expectations of market behavior in very much the same way described for production costs.
Technological improvements that result in an increase in production for a set amount of inputs would result in an outward shift in supply.
Supply will shift outward in response to indications of heightened consumer enthusiasm or preference and will respond by shifting inward if there is an assessment of a negative impact to production costs or demand .
Source: Boundless. “Changes in Supply and Shifts in the Supply Curve.” Boundless Economics. Boundless, 26 May. 2016. Retrieved 29 Jul. 2016 from https://www.boundless.com/economics/textbooks/boundless-economics-textbook/introducing-supply-and-demand-3/supply-47/changes-in-supply-and-shifts-in-the-supply-curve-178-12276/