Movements Along and Shifts of Supply
A change in the good's own price moves producers along supply—a change in quantity supplied. Input prices, technology, taxes and subsidies, expectations, natural conditions, or the number of sellers shift the entire supply curve.
Infer direction from cost
Changes that lower unit cost or expand capacity normally shift supply right; higher costs or damaged capacity shift it left. Better technology, cheaper inputs, and subsidies often increase supply, while disasters, input-price increases, and unit taxes reduce it.
Let marginal cost guide the direction
Ask whether an event makes the same unit easier or cheaper to produce. Lower cost or greater capacity means more is worthwhile at every price, shifting supply right. Higher cost or damaged capacity shifts it left.
| Event | Effect | Direction |
|---|---|---|
| labor-saving automation | lower unit cost | right |
| raw-material price rise | higher unit cost | left |
| per-unit tax | lower net return | left |
| seller entry | greater capacity | right |
Technology does not mechanically shift supply right if it changes the product being defined. Expectations need timing too: expected future prices may reduce current supply of a storable good while encouraging investment that expands future supply.
Robots, power and storms
Unlock the complete interactive lab, deeper explanations, and curated reference answers.
Expectations require a time label. If sellers expect next month's price to rise, current supply of a storable good may fall. Expected long-run demand growth may instead encourage investment today and expand future supply.
KNOWLEDGE QUIZ
A bakery's energy and technology shocks
A local bakery market supplies batches per day. Compare shocks at the same product price. A delivery improvement lowers unit costs, while an energy shock raises them.
Baseline Qs=10+5P. Energy shock subtracts 10 batches at every price; delivery improvement adds 15.
- Calculate supply at P=6 in baseline and each independent shock; write the functions.
- Combine shocks. Then compare with an own-price rise from 6 to 8 without shocks.
- Sketch the changes and explain why higher sales do not prove technology improved.