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Shifts in Supply Unit 2.

Published bySudirman Kartawijaya Modified over 6 years ago

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Presentation on theme: "Shifts in Supply Unit 2."— Presentation transcript:

1 Shifts in Supply Unit 2

2 Supply Graph Price Quantity S

3 Change in Quantity Supplied
Changes in price cause a change in quantity supplied Illustrated by moving from one point to another on the supply curve

4 Changes in Supply INCREASE in Supply: Businesses are willing and able to sell MORE of a good AT EVERY PRICE LEVEL DECREASE in Supply: Businesses are willing and able to sell LESS of a good AT EVERY PRICE LEVEL Illustrated by shifting the entire supply curve

5 INCREASE in supply shifts the supply curve to the RIGHT
Price Quantity S1 S2 INCREASE in supply shifts the supply curve to the RIGHT

6 DECREASE in supply shifts the supply curve to the LEFT
Price Quantity S1 DECREASE in supply shifts the supply curve to the LEFT

7 Why Supply Shifts: Determinants of Supply
Technology/Productivity Cost of Inputs/Factors of Production Number of Sellers Producer Expectations Government Price of Related Goods Weather/Natural Disasters

8 Technology/Productivity
Improves production of G&S Makes G&S more cheaply Leads to more productivity and efficiency

9 Cost of Inputs/ Factors of Production
If cost of a factor of production increases, supply will decrease. More expensive to produce good If cost of a factor of production decreases, supply will increase. Less expensive to produce good

10 Number of Sellers Increase in the number of businesses in the market will increase the supply of a good Decrease in the number of businesses in the market will decrease the supply of a good

11 Producer Expectations
If producers expect they can sell a good for a higher price in the near future, supply will increase now. If producers expect they can sell a good for a lower price in the near future, supply will decrease now.

12 Government: Regulations or Taxes
Increase in government regulations or taxes on businesses decreases supply. Decrease in government regulations or taxes on businesses increases supply.

13 Government: Subsidies
Increase in government subsidies for businesses increases supply. Decrease in government subsidies for businesses decreases supply.

14 Price of Related Goods If businesses can sell other G&S for a higher price, they will shift production away from their product to the G&S they can sell at a higher price. Supply for original good decreases. Supply for new good increases.

15 Weather/Natural Disasters
Natural disasters or bad weather will decrease supply Good weather could increase supply of agricultural products

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