SUPPLY Factors that shift supply

TODAY’S AGENDA  Objective: To identify the factors that shift supply and which direction the curve shifts.  Essential Skill: To explicitly assess information and draw conclusions.

Change in quantity supplied (a movement along the curve) CHANGE IN QUANTITY SUPPLIED Price (per unit) Quantity supplied (per unit of time) S0S0 $15 A 1,2501,500 B

SHIFT IN SUPPLY Price (per unit) Quantity supplied (per unit of time) S0S0 Shift in Supply (a shift of the curve) S1S1 $15 AB 1,2501,500

NON-PRICE DETERMINANTS OF SUPPLY: FACTORS THAT SHIFT THE SUPPLY CURVE “ROTTEN”

“R” IS FOR RESOURCE Changes in r esource prices or input costs Elements of nature and political disruptions

“O” IS FOR OTHER Change in Prices of o ther goods produced and offered for sale

“T” IS FOR TECHNOLOGY Changes in t echnology

“T” IS FOR TAXES Changes in t axes and subsidies

“E” IS FOR EXPECTATIONS Change in e xpected future prices, (producer) expectations

“N” IS FOR NUMBER Change in the n umber of suppliers in the market Elements of nature and political disruptions

NON-PRICE DETERMINANTS OF SUPPLY  Changes in r esource prices or input costs  Elements of nature and political disruptions  Change in Prices of o ther goods produced and offered for sale  Changes in t echnology  Changes in t axes and subsidies  Change in Expected future prices (producer) e xpectations  Change in the n umber of suppliers in the market  Elements of nature and political disruptions

QUICK TIP  Any factor that increases the cost of production decreases supply  Any factor that decreases the cost of production increases supply

COSTS INCREASE; PROFITS DECREASE  Government regulations increase cost  Natural disasters increase cost  Expectations about future prices increase cost (put in inventory)  Increased taxes increase cost  Costs of inputs increase

COSTS DECREASE; PROFITS INCREASE  Technological advances  Number of firms increase  Subsidies  Future price decrease  Taxes decrease  Cost of inputs decrease