Shifts in supply

A shift of a supply curve is caused by a change in an underlying condition of supply, such as the cost of raw materials, rather than the price of the good or service.

The following supply schedule shows the original supply against price, with two further columns - S1 indicates an increase in supply of 400 units at each price, and S2 indicates a reduction in supply of 400 units.

Supply curve shifts

A shift of supply to the right

Taking data from the supply schedule we can identify S1 as an increase in supply - where the supply curve shifts to the right.

Supply curve shifts

Assuming price is constant, a shift to the right (at S1) is an increase in supply which could be caused by;

  1. More available raw materials;
  2. An increase in the supply of labour;
  3. Subsidies on goods or services;
  4. A reduction in taxes;
  5. Unusually good weather or other beneficial supply factors.

A shift to the left in supply

Supply curve shifts

A shift of a supply curve to the left (at S2) is a decrease in supply. Assuming the price is constant, a shift in supply to the left could be caused by:

  1. Less available raw materials;
  2. More expensive raw materials;
  3. A reduction in the supply of labour;
  4. Taxes on goods or services;
  5. Bad weather or other disruptive natural events.
Video on shifts in supply
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