Change in S vs. Change in Qs Chapter 5, Lesson Two

Change in Quantity Supplied This is a movement ALONG the curve resulting from a change in price As prices change, producers will be willing to produce more or less (depending on the direction of the price change) resulting in a new point on the same graph

Change in Qs

Change in Supply Change in supply is when there is a shift in the entire supply curve resulting from some outside force that changes the amount of a product supplied at each given point

A Change in Supply Versus a Change in Quantity Supplied When supply shifts to the right, supply increases. This causes quantity supplied to be greater than it was prior to the shift, for each and every price level.

Change in Supply Say you are a producer. What would cause you to produce MORE or LESS of a product, even though the price (how much you will earn when you sell the product) doesn’t change at all?

Change in Supply Determinants of Supply—Forces that will cause the entire supply curve to shift either left or right (so producers will produce more or less, even though the price of the product has not changed)

Determinants of Supply Factor costs—if the cost of production increases, the selling price will have to rise to cover these costs --so anything that will affect the cost of ANY of the factors of production (land, labor, capital) will shift the curve

Determinants of Supply Technology and regulations—new production technology can lower the cost of production; regulations and requirements implemented by the government will raise the cost of production

Determinants of Supply Expectations—future expectations of the market or industry may cause a firm to adjust its quantity supplied The number of firms—when more firms enter the industry, more of the good can be offered at each price

Determinants of Supply The bottom line— ANYTHING that changes how long it takes to produce or how much it costs to produce will change supply and shift the supply curve What about Employee Morale?

Movement of the Supply Curve If it costs more to make an item, will you make more or less? LESS, so the curve shifts LEFT (just like the demand curve) If it costs less to make an item, will you make more or less? MORE, so the curve shifts RIGHT (just like the demand curve)

A Change in Supply Versus a Change in Quantity Supplied Change in price of a good or Service leads to Change in quantity supplied (Movement along the curve). Change in costs, input prices, technology, regulations, expectations, or other firms leads to Change in supply (Shift of curve).