What Happens When the Supply Curve Shifts
What Happens When the Supply Curve Shifts
Student
Feb 17, 2013
Principles of Microeconomics
The Supply Curve: Price is usually a major factor in the quantity supplied to the market. For a particular good with all other factors held constant a table could be constructed of price and quantity supplied based on observed data. This table is called a supply schedule, example:
Supply Schedule
Price Quantity Supplied
1 12
2 28
3 42
4 52
5 60
By graphing this data the supply curve is created:
The convention of the supply curve is to display the quantity supplied on the x-axis as the independent variable and the price on the y-axis as the dependent variable. The law of supply states that the higher the price the larger the quantity supplied, with all other things being constant. A change in price will result in a change in quantity supplied and represents movement along the supply curve. Shifts in the Supply Curve: while changes in price result in movement along the supply curve, changes in other factors cause a shift in supply that result in a shift in the supply curve to the left or the right. If the change caused an increase in the quantity supplied at each price then the supply curve would shift to the right. There are many factors that could cause shifts in the supply curve a few are:
• Goods own price—generally there is a positive relationship between the price of goods and the quantity supplied
• Price of related goods—related goods are the goods used to produce the primary goods
• Conditions of production—technology is the most significant factor, if there is a technological advancement in the good’s production the supply increases
• Expectations—the sellers believe concerning future demand will affect the current production of goods
• Price of inputs—inputs are things like land, labor, energy and raw materials, if they increase in cost than the producer may raise the price or cut production
• Number of
Student
Feb 17, 2013
Principles of Microeconomics
The Supply Curve: Price is usually a major factor in the quantity supplied to the market. For a particular good with all other factors held constant a table could be constructed of price and quantity supplied based on observed data. This table is called a supply schedule, example:
Supply Schedule
Price Quantity Supplied
1 12
2 28
3 42
4 52
5 60
By graphing this data the supply curve is created:
The convention of the supply curve is to display the quantity supplied on the x-axis as the independent variable and the price on the y-axis as the dependent variable. The law of supply states that the higher the price the larger the quantity supplied, with all other things being constant. A change in price will result in a change in quantity supplied and represents movement along the supply curve. Shifts in the Supply Curve: while changes in price result in movement along the supply curve, changes in other factors cause a shift in supply that result in a shift in the supply curve to the left or the right. If the change caused an increase in the quantity supplied at each price then the supply curve would shift to the right. There are many factors that could cause shifts in the supply curve a few are:
• Goods own price—generally there is a positive relationship between the price of goods and the quantity supplied
• Price of related goods—related goods are the goods used to produce the primary goods
• Conditions of production—technology is the most significant factor, if there is a technological advancement in the good’s production the supply increases
• Expectations—the sellers believe concerning future demand will affect the current production of goods
• Price of inputs—inputs are things like land, labor, energy and raw materials, if they increase in cost than the producer may raise the price or cut production
• Number of
References: Bittman, M. (2011, June 14). The Opinion Pages. The New York Times. Stephanie Strom. (2013, Feburary 4). United States and mexico reach tomato deal, averting a trade war. New York Times. Suzanne Thornsbury. (2012, October 9). USDA Economic Research Service. United States Department of Agriculture.