Economics

What are supply shifters?

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2010-11-22 05:23:09

Supply Shifters

Elasticities deal only with the impact of own-price (note:

own-price refers, for

example, to the impact of a

"mso-bidi-font-weight: normal">price change in

"mso-bidi-font-weight: normal">pork on the

"mso-bidi-font-weight: normal">quantity of

"mso-bidi-font-weight: normal">pork) changes on supply.

However, there are other factors which affect supply by moving or

"shifting" the supply curve. It is a minor point, but if a supply

curve shifts, the elasticities may or may not remain valid.

Supply shifters:

(1) Change in the price of inputs to production

point of impact:

changes MC and AC curves.

(2) Technology

point of impact:

production function

(3) Number of sellers

point of impact: more

or fewer producers to sum into supply curve.

(4) Future price expectations

point of impact:

point on MC curve producer shoots for.

(5) Taxes subsidies

point of impact: MC

and AC curves.

(6) Government restrictions

point of impact:

production function

(7) Weather

Point of impact:

production function

(8) Prices of related goods

Point of impact:

through market price - not common in specialized agricultural

production. However, classic example was lamb and wool products

which are joint products (complements in production). Corn and

soybeans would be substitutes in production (forget for the moment

that planting corn after soybeans is beneficial so may be

complementary in long run).


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