Introduction

After you have worked through this section of the learning unit, you should be able to:

  • identify the factors that cause a change in supply

A change in supply occurs when there is a change in any of the non-price determinants of supply.

These are factors such as the:

  • price of inputs (cost of production)
  • prices of alternative goods
  • technology needed to make the good
  • expected prices
  • number of suppliers
  • weather and other factors

Any change in any of these non-price factors of supply will cause a shift of the supply curve. This is because at every price, the quantity supplied will change.

Activity

Do the following activity about changes in supply.

Is the rightward shift of the supply curve from S to S1 the result of a(n) _____?





Correct.  A rightward shift is caused by an increase in supply.

Think again.  We are dealing with supply.

Think again.  A leftward shift is the result of a decrease in supply.

Think again. We are dealing with supply.

Which of the following factors would explain a rightward shift of the supply curve from S to S1?

Select all of the relevant choices.

  1. An increase in the number of suppliers
  2. An increase in the number of households
  3. A decrease in the price
  4. A decrease in income
  5. A decrease in the cost of production
  6. An increase in the taste and preference for the product
  7. An improvement in the technology used
Click to see the answer

a, e and g.

The rightward shift could be the result of any factor that increases the supply. In this case, an increase in the number of suppliers, a decrease in the cost of production and an improvement in technology would increase the supply.