Change In Supply

Change In Supply
See also

Change in supply is an economic term which means a shift in the supply curve, caused by a change in any variable other than the own price (Piros C.D. and others 2013, p. 12). There are two possibilities for shifting the supply curve. Shifting the supply curve to the right means an increase in supply, while shifting to the left means a decrease in supply (Sexton L.R. 2018, p. 112).

A change in quantity supplied vs. a change in supply

The difference between a change in supply of quantity and a change in supply is that the change in supply of quantity applies to movement along the supply curve and depends only on one factor, which is the change in own price, while the change in supply refers to a shift in the supply curve to the right or left and can be caused by many factors, such as government restrictions, technology or number of sellers (Arnold A.R. 2014, p. 72).

Factors affecting supply change

Key determinants that affect the change in supply are:

  • The prices of raw materials have a direct impact on production costs. A reduction in the price of raw materials will make production cheaper and companies will be willing to supply more at any price of the product. A decrease in the price of raw materials will increase supply and shift the supply curve to the right, while an increase in the price of raw materials will reduce supply and shift the supply curve to the left (Hoskins C. and others 2004, p. 50).
  • Technology - the change in technology will result that products will be produced in a better, faster and more effective way, this will reduce production costs by allowing a given level of output to be produced using less input than before, causing in a shift of supply curve to the right (Hoskins C. and others 2004, p. 50-51).
  • Number of suppliers - increasing the number of companies on the market will cause that the short-term supply curve will shift to the right, as, the number of companies increases, more products will be supplied (Hoskins C. and others 2004, p. 51).
  • Expectations of future price - if producers predict that the price of a given product may increase in the future, they may reduce the supply of that product, for example by stopping or reducing production (Arnold A.R. 2014, p. 81)
  • Prices of other goods - an increase/decrease in the price of a given good may result in decrease/increase in another good (Arnold A.R. 2014, p. 81)

References

Author: Natalia Węgrzyn