What are the forces behind the supply curves?

Answer 1

While changes in price result in movement along the supply curve, changes in other relevant factors cause a shift in supply, that is, a shift of the supply curve to the left or right.Such a shift results in a change in quantity supplied for a given price level. If the change causes an increase in the quantity supplied at each price, the supply curve would shift to the right:

Supply Curve Shift

There are several factors that may cause a shift in a good's supply curve. Some supply-shifting factors include:

· Prices of other goods - the supply of one good may decrease if the price of another good increases, causing producers to reallocate resources to produce larger quantities of the more profitable good.

· Number of sellers - more sellers result in more supply, shifting the supply curve to the right.

· Prices of relevant inputs - if the cost of resources used to produce a good increases, sellers will be less inclined to supply the same quantity at a given price, and the supply curve will shift to the left.

· Technology - technological advances that increase production efficiency shift the supply curve to the right.

· Expectations - if sellers expect prices to increase, they may decrease the quantity currently supplied at a given price in order to be able to supply more when the price increases, resulting in a supply curve shift to the left.