2. Changes in Supply
• A change in supply occurs when producers offer
a different quantity of output at each possible
price.
• This might happen because of changes in the
cost of production, in government policies, in the
number of producers, or in the expectations of
businesses.
• When supply goes down, the supply curve shifts
to the left.
• When supply goes up, the supply curve shifts to
the right.
3. Factors Influencing Production
• Businesses use the four factors of production to
produce goods and services.
• When prices of these resources fall, costs of
production fall.
– Producers are then willing and able to offer more of
the product for sale at each price.
– The supply curve shifts to the right.
• When prices of resources rise, production costs
rise.
• Producers are then willing and able to offer less
of the product for sale at each price.
– The supply curve shifts to the left.
4. Productivity
• Productivity is the degree to which resources
are being used efficiently to produce goods and
services.
• Workers are more efficient when they produce
more output in the same amount of time.
– This reduces the company’s costs.
• More products are produced at every price,
which shifts the supply curve to the right.
• When productivity falls, production costs go up.
– The supply curve shifts to the left.
5. New Innovations
• Technology refers to the methods or
processes used to make goods and
services.
• New technology can speed up ways of
doing things, which can cut a business’s
costs.
• This pushes the supply curve to the right,
showing that the business is willing to
supply more at the same price.
6. Outside Influences
• Government actions can affect the cost of
production, causing a change in supply.
• In general, tighter government regulations
restrict supply, causing the supply curve to
shift to the left.
• Relaxed regulations lower the cost of
production, shifting the supply curve to the
right.
7. Subsidies
• To businesses, higher taxes mean higher costs, pushing
the supply curve to the left.
– Lower taxes mean lower costs, shifting the supply curve to the
right.
• A subsidy is a government payment to an individual,
business, or other group for certain actions.
• A subsidy paid to a producer lowers the cost of
production.
• This encourages current producers to remain in the
market and new producers to enter.
• When subsidies are repealed, costs go up, producers
leave the market, and the supply curve shifts to the left.
8. Expectations
• Producers’ expectations also affect supply.
– If they expect strong consumer demand, they will
produce more.
– If they expect weak demand, they will produce less.
• A change in the number of suppliers causes a
change in market supply.
• As more firms enter an industry, they increase
the supply in the market, shifting the curve to the
right.
• If some suppliers leave, supply decreases,
shifting the curve to the left.
9. Elasticity of Supply
• Supply elasticity is a measure of how the quantity
supplied of a good or service changes in response to
changes in price.
– If the quantity changes a great deal when prices go up or down,
the product is said to be supply elastic. If the quantity changes
very little, the supply of that product is inelastic.
• Supply elasticity depends on how quickly a company can
change the amount it makes in response to price
changes.
• Products that cannot be made quickly or that are
expensive to produce tend to be supply inelastic.
• Products that can be made quickly without large
investments of money or skilled labor tend to be supply
elastic.
10. Elasticity of Supply
• Supply elasticity is a measure of how the quantity
supplied of a good or service changes in response to
changes in price.
– If the quantity changes a great deal when prices go up or down,
the product is said to be supply elastic. If the quantity changes
very little, the supply of that product is inelastic.
• Supply elasticity depends on how quickly a company can
change the amount it makes in response to price
changes.
• Products that cannot be made quickly or that are
expensive to produce tend to be supply inelastic.
• Products that can be made quickly without large
investments of money or skilled labor tend to be supply
elastic.
