Mr. Barnett AP Economics University High Supply Shifts Mr. Barnett AP Economics University High

Determinants of Supply Changes that raise/reduces the quantity supplied at every price Input Prices Technology Expectations Physical Availability of Resources Number of Sellers An increase in supply is represented by a shift to the right for supply – equilibrium price will decrease, quantity will increase A decrease in supply is represented by a shift to the left for supply – equilibrium price will increase, quantity will decrease

Determinants of Supply Input Prices Sellers use various inputs (factors of production) When the price of one or more input rises, producing the good or service becomes less profitable Firms supply less of the good May even shut down production if input prices rise too high What costs might rise in our lemonade example?

Determinants of Supply Technology A technological improvement can reduce the cost of production – raising profit and supply Supply increases and price will decrease

Determinants of Supply Future Expectations Future expectations affect suppliers too If you think the price of your good will be higher in the future you might store some of your product for the future This decreases supply, raising prices and decreasing quantity If you think the future price will be lower, you will sell more of your product now Increases supply, decreases prices and increases quantity

Determinants of Supply Physical Availability of Resouces If more resources are found or become available, the supply will increase This will cause the price to decrease and quantity to increase If resources become unobtainable, the supply will decrease This will cause the price to increase, and quantity to decrease

Determinants of Supply Number of Suppliers Suppliers will enter or exit a market because of numerous reasons An increase in suppliers will increase the supply of the good or service A decrease in suppliers will decrease supply