Shifts in Supply Unit 2 Supply Graph S

Change in Quantity Supplied Changes in price cause a change in quantity suppled Illustrated

Changes in Supply INCREASE in Supply: Businesses are willing and able to sell MORE

Increase in Supply S 1 Price S 2 INCREASE in supply shifts the supply

Decrease in Supply S 2 S 1 DECREASE in supply shifts the supply curve

Why Supply Shifts: Determinants of Supply Technology/Productivity Cost of Inputs/Factors of Production Number of

Technology/Productivity Improves production of G&S Makes G&S more cheaply Leads to more productivity and

Cost of Inputs/ Factors of Production If cost of a factor of production increases,

Number of Sellers Increase in the number of businesses in the market will increase

Producer Expectations If producers expect they can sell a good for a higher price

Government: Regulations or Taxes Increase in government regulations or taxes on businesses decreases supply.

Government: Subsidies Increase in government subsidies for businesses increases supply. Decrease in government subsidies

Price of Related Goods If businesses can sell other G&S for a higher price,

Weather/Natural Disasters Natural disasters or bad weather will decrease supply Good weather could increase

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Shifts in Supply Unit 2

Supply Graph S Price Quantity

Change in Quantity Supplied Changes in price cause a change in quantity suppled Illustrated by moving from one point to another on the supply curve

Changes in Supply INCREASE in Supply: Businesses are willing and able to sell MORE of a good AT EVERY PRICE LEVEL DECREASE in Supply: Businesses are willing and able to sell LESS of a good AT EVERY PRICE LEVEL Illustrated by shifting the entire supply curve

Increase in Supply S 1 Price S 2 INCREASE in supply shifts the supply curve to the RIGHT Quantity

Decrease in Supply S 2 S 1 DECREASE in supply shifts the supply curve to the LEFT Price Quantity

Why Supply Shifts: Determinants of Supply Technology/Productivity Cost of Inputs/Factors of Production Number of Sellers Producer Expectations Government Price of Related Goods Weather/Natural Disasters

Technology/Productivity Improves production of G&S Makes G&S more cheaply Leads to more productivity and efficiency

Cost of Inputs/ Factors of Production If cost of a factor of production increases, supply will decrease. More expensive to produce good If cost of a factor of production decreases, supply will increase. Less expensive to produce good

Number of Sellers Increase in the number of businesses in the market will increase the supply of a good Decrease in the number of businesses in the market will decrease the supply of a good

Producer Expectations If producers expect they can sell a good for a higher price in the near future, supply will increase now. If producers expect they can sell a good for a lower price in the near future, supply will decrease now.

Government: Regulations or Taxes Increase in government regulations or taxes on businesses decreases supply. Decrease in government regulations or taxes on businesses increases supply.

Government: Subsidies Increase in government subsidies for businesses increases supply. Decrease in government subsidies for businesses decreases supply.

Price of Related Goods If businesses can sell other G&S for a higher price, they will shift production away from their product to the G&S they can sell at a higher price. Supply for original good decreases. Supply for new good increases.

Weather/Natural Disasters Natural disasters or bad weather will decrease supply Good weather could increase supply of agricultural products