Change In Supply
Change in supply refers to the shift in the entire supply curve due to factors other than price. This can be caused by changes in production costs, technology, government policies, or the number of suppliers in the market. An increase in supply leads to a rightward shift of the supply curve, while a decrease leads to a leftward shift.
8 Key excerpts on "Change In Supply"
eBook - ePubMedia Economics
Applying Economics to New and Traditional Media
- Colin Hoskins, Stuart M. McFadyen, Adam Finn(Authors)
- 2004(Publication Date)
- SAGE Publications, Inc(Publisher)
...This is considered further in chapter 14. 3.4 Change In Supply A change in the value of one of the determinants of supply other than own price causes a Change In Supply. Economists use this term to avoid confusion with change in quantity supplied, which is caused by a change in the price of the product itself. If there is a Change In Supply, this causes a shift of the entire supply curve. If there is an increase in supply, the supply curve will shift to the right, as more will be supplied than before at any given price. If there is a decrease in supply, the supply curve will shift to the left, indicating that less will be supplied at any given price. 3.5 Effect of Change In Supply on Price and Quantity A Change In Supply causes the equilibrium price to change in the opposite direction to the Change In Supply. In contrast, the equilibrium quantity changes in the same direction as the Change In Supply. Figure 3.4 illustrates an increase in supply from S 0 to S 1, resulting in a decrease in equilibrium price from P 0 to P 1 and an increase in equilibrium quantity from Q 0 to Q 1. Figure 3.5 shows a decrease in supply from S 2 to S 3, causing the equilibrium price to increase from P 2 to P 3 and the equilibrium quantity to decrease from Q 2 to Q 3. Figure 3.4 An Increase in Supply Note: D indicates demand curve; P, price; Q, quantity; S, supply curve. Figure 3.5 A Decrease in Supply Note: D indicates demand curve; P, price; Q, quantity; S, supply curve. 3.6 Causes of a Change In Supply A Change In Supply is caused by a change in the value of any determinant other than own price. Key determinants are the prices of inputs, the state of technology, and the number of suppliers. 3.6.1 Prices of Inputs Input prices directly affect the cost of producing the industry output. A decrease in input price makes it less expensive to produce output, and firms will be willing to supply more at any given product price...
eBook - ePub- Andrew Barkley, Paul W. Barkley(Authors)
- 2020(Publication Date)
- Routledge(Publisher)
...A movement along the supply curve. Change In Supply —A change in the supply of a good due to a change in an economic variable other than the price of the good. A shift in the supply curve. Complements in Production —Two or more goods produced together in the same production process (e.g., beef and leather). Cross-Price Elasticity of Supply —A measure of the responsiveness of the quantity supplied of a good to changes in the price of a related good. Elastic Supply —A change in price brings about a relatively larger change in quantity supplied. Elasticity —The percentage change in one economic variable in response to a percentage change in another economic variable. Elasticity of Supply —The percentage change in the quantity supplied in response to a percentage increase in price. Inelastic Supply —A change in price brings about a relatively smaller change in quantity supplied. Law of Supply —The quantity of goods supplied to a market varies directly with the price of the good, ceteris paribus. Market Supply Curve —The relationship between the price and quantity supplied of a good, ceteris paribus, derived by the horizontal summation of all individual supply curves for all individual producers in the market. Own-Price Elasticity of Supply —Measures the responsiveness of the quantity supplied of a good to changes in the price of that good. Substitutes in Production —Goods that compete for the same resources in production (e.g., wheat and barley compete for farmland). Supply —The...
eBook - ePub- Andrew Barkley, Paul W. Barkley(Authors)
- 2016(Publication Date)
- Routledge(Publisher)
...A movement along the supply curve. Change In Supply. A change in the supply of a good due to a change in an economic variable other than the price of the good. A shift in the supply curve. Complements in Production. Two or more goods produced together in the same production process (e.g. beef and leather). Cross-Price Elasticity of Supply. A measure of the responsiveness of the quantity supplied of a good to changes in the price of a related good. Elastic Supply. A change in price brings about a relatively larger change in quantity supplied. Elasticity. The percentage change in one economic variable in response to a percentage change in another economic variable. Elasticity of Supply. The percentage change in the quantity supplied in response to a percentage increase in price. Inelastic Supply. A change in price brings about a relatively smaller change in quantity supplied. Law of Supply. The quantity of goods supplied to a market varies directly with the price of the good, ceteris paribus. Market Supply Curve. The relationship between the price and quantity supplied of a good, ceteris paribus, derived by the horizontal summation of all individual supply curves for all individual producers in the market. Own-Price Elasticity of Supply. Measures the responsiveness of the quantity supplied of a good to changes in the price of that good. Substitutes in Production. Goods that compete for the same resources in production (e.g...
eBook - ePubContemporary Economics
An Applications Approach
- Robert Carbaugh(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...As a result, a higher price causes a greater level of output to be supplied to the market. Changes in Supply: Supply Shifters Recall that a supply curve refers to the entire relationship between the price of a product and the quantity supplied, when all other determinants of supply remain unchanged. When these other determinants change, the supply curve will shift either outward to the right or backward to the left. Therefore, we call a change in a variable that causes a shift a supply shifter. A shift in a supply curve induced by a supply shifter is called a Change In Supply. Figure 2.4 shows the change in the supply of CDs. Because of changing determinants of supply, if producers become willing and able to supply additional CDs at each possible price, the result will be an increase in supply. In the figure, we can see that the supply curve shifts to the right, from Old Supply Curve to New Supply Curve. However, if the determinants of supply change, such that suppliers are less willing and able to supply CDs at each possible price, the supply of CDs will decrease— that is, the supply curve will shift to the left. Let us examine how each supply shifter affects the location of the supply curve. Resource prices. The possible profit at a particular price depends on the prices that a supplier must pay for the resources to produce a good or service. For example, a decrease in the prices of labor and materials used to produce CDs decreases the cost of producing CDs, resulting in a greater profit from selling a particular quantity. This increases the supply of CDs. Conversely, increases in resource prices result in falling profitability and a decrease in supply. Technology. Improvements in technology tend to reduce the amount of resources needed to produce a given level of output, resulting in lower costs of production and increased supply...
eBook - ePubIntermediate Microeconomics
Neoclassical and Factually-oriented Models
- Lester O. Bumas(Author)
- 2015(Publication Date)
- Routledge(Publisher)
...They are presented here in the way required to increase supply. Turn them around and decreases will occur. The Number of Producers. An increase in the number of producers increases the market supply function. Technology. Technology is knowledge of the process of production. An advance in technology implies better organization of the workforce or the provision of better tools to that workforce, or both. This should yield an increase in productivity, decrease in production costs, and increase in supply. Capital per Worker. The provision of additional equipment per worker tends to increase productivity, decrease the cost of producing at various rates of production, and increase supply. Factor Costs. A decrease in the cost of one or more of the factors of production will cause an increase in supply. The Price of Substitute Products. Assume that a farmer can produce either wheat or corn. A decrease in the expected price of corn would increase the supply of wheat. The Price of a Joint Product. The rancher who raises cattle for beef alsoproduces the joint product hides. Were the price of hides expected to increase, the supply of hides and beef would tend to increase. Figure 2.14. Supply Shifts Note that there may be a delay between the change in a shift parameter and a shift in the supply function. In addition if the producer is a price setter and prices are normally changed each year on July 1, appropriate price changes tend to be delayed until that date is reached. The Price Elasticity of Supply The price elasticity of supply is the ratio of the percentage change in the quantity supplied per unit of time to the percentage change in price. Figure 2.15. Supply Functions in Different Elasticity Ranges It is conceptually the same as the price elasticity of demand, except that the quantities in question are those supplied: It is a measure of the responsiveness of the rate of production to variations in price...
eBook - ePub- Danny Myers(Author)
- 2018(Publication Date)
- Routledge(Publisher)
...In this case, the current quantity supplied at each and every price would decrease; the related supply curve would shift to the left. Chapter summary 4.2 • It is the inelastic supply of land and property that causes the related markets to be unstable and characterised by periods of escalating prices. • Supply within the property sector is made up of several interrelated markets. Output is determined by thousands of firms that can transfer to other sectors of the industry if they think it would be worthwhile. • The supply curve is plotted on the assumption that other things are held constant. Four important non-price determinants are (a) costs of production (including technological changes), (b) government, (c) institutional changes, and (d) expectations. Understanding changes in supply Just as we were able to distinguish between shifts of, and movements along, the demand curve, so we can have the same discussion for the supply curve. A change in the price of a good itself will cause a movement along the supply curve, and be referred to as an extension or contraction of supply. A change in any non-price determinant, however, will shift the curve itself and be referred to as an increase or decrease in supply. It will be helpful to remember these four terms whenever you are trying to distinguish the precise cause of a change to the quantity of supply. Elasticity Economists are often interested in the degree to which supply (or demand) responds to changes in price. The measurement of price responsiveness is termed price elasticity. Price elasticity A measurement of the degree of responsiveness of demand or supply to a change in price. A numerical value for the price elasticity of supply (PES) may be calculated using the formula: What the formula tells us is the relative amount by which the quantity supplied will change in relation to price changes. For example, if a 10% increase in price leads to a 1% increase in the quantity supplied the PES is 0.1...
eBook - ePub- Tom Craig, David Campbell(Authors)
- 2012(Publication Date)
- Routledge(Publisher)
...Supply is extended when the price–quantity situation moves up and to the right (more quantity at higher price). It is contracted when it moves down and to the left (less quantity, lower price). Figure 17.12 Contraction and extension of supply. Similarly, anything that causes more or less to be supplied at every price (such as a good or bad harvest), will cause a shift in the supply curve (Figure 17.13). Figure 17.13 Shifts is supply. If Q 2 is the initial quantity supplied at price P, then: a leftward shift would reduce Q 2 to Q 1 at the same price – less supply at every price; a rightward shift would increase Q 2 to Q 3 at the same price – more supply at every price. Supply shifts are brought about by changes in the internal or external environment of the suppliers. To show how this might work, a rightward shift (more supply at every price) could be caused by: Decreases in the costs of production. If the supplier can get labour or materials at lower cost, it can produce more for the same cost. A fall in the price of other goods. If suppliers receive less revenue by producing some goods, they will tend to produce other goods instead. For example, if the price of baked beans falls, food suppliers may produce more peas. This would signal a rightward shift in the supply curve for peas. Technological improvement both reduces the costs of production and can increase production capacity. Question 17.5 Consider the supply of bus services by bus operators. If more bus services are supplied at every price: Which way would the supply curve for bus services shift? What might cause this increase in supply at every price? 17.3 Price Determination So far in this chapter, we have looked at the demand side (the quantity that would be demanded over a range of prices) and the supply side (the quantity that would be supplied over a range of prices). The problem is that we do not yet know what the actual price of a good or service will be...
eBook - ePub- Ralph Turvey(Author)
- 2022(Publication Date)
- Routledge(Publisher)
...Unfortunately, despite the simplicity of such markets, measurement of supply relationships is trickier than the measurement of demand relationships - at least as regards those of nondurable goods. The time factor is the reason for this contrast. Margarine purchasers can alter their behaviour pretty fast in response to price changes. Wheat farmers, on the other hand, decide how much they sow rather than how much they harvest, and do so in relation to the prices that they expect to rule for the harvested crop. Thus wheat supply is a matter of their decisions and of their expectations, whereas the statistics available usually relate to actual harvests and to realized prices. Furthermore, a sustained expectation of higher prices may lead farmers to acquire more equipment over a period of years, so that the full response of supply to price is spread out over time. In technical jargon, the elasticity of supply may be greater in the long run than in the short run. Supply, then, both of goods and even more of labour, is less promising than demand for empirical illustration or for application. Since this is an empirically oriented book, we had better leave it there for the present. 6.11. Prices, information and incentive It is a fundamental proposition of demand and supply that an increasing scarcity of something leads to the substitution for it of other things. Where the ‘something’ can be bought and sold, we have said that a major manifestation of growing scarcity is a rise in price relative to the prices of other things. Such a rise in relative price provides an incentive: - to purchasers, to substitute other things; - to sellers, to increase supply. As was mentioned earlier, a large part of economic theory has been built on the assumption that prices are the only mechanism which adjust demand and supply to each other. This, it has now been made clear, is a gross simplification in many markets...
