Changes in Supply

What causes a change in supply? Any change in the cost of an input used to produce a good (raw materials, machinery, or labor) will affect supply A rise in the cost of an input will cause a decrease in supply at all price levels A fall in the cost of an input will cause an increase in supply at all price levels

Changes in Supply Technology Change in productivity New machinery can reduce the cost of manufacturing Change in productivity New working methods for employees Structural changes to the workforce

Subsidies Government payment that supports a business or market. Generally lower costs, allowing a firm to produce more goods. They are particularly common with food production.

Changes in Supply Taxes A government can reduce the supply of some goods by placing an excise tax (a tax on the production or sale of a good) This tax increases the production cost of the good Excise Tax - increases production costs by adding an extra cost for each unit sold. Discourage the sale of goods (cigarettes, alcohol, high-pollutant gasoline)

Changes in Supply Government Regulations - government intervention in a market that affects the price, quantity, or quality of a good. Change in the number of sellers of a type of good If more sellers enter the market, supply increases If sellers exit the market, supply decreases Future Expectations about price