Info

(table 3-7) DETERMI THE SUP

NANTS OF SUPPLY: FACTORS THAT SHIFT PLY CURVE

Determinant

Examples

Change in resource prices

Change in technology Changes in taxes and subsidies

Change in prices of other goods Change in expectations Change in number of suppliers

A decrease in the price of microchips increases the supply of computers; an increase in the price of crude oil reduces the supply of gasoline.

The development of more effective wireless technology increases the supply of cell phones.

An increase in the excise tax on cigarettes reduces the supply of cigarettes; a decline in subsidies to universities reduces the supply of higher education.

An increase in the price of cucumbers decreases the supply of watermelons.

An expectation of a substantial rise in future log prices decreases the supply of logs today.

An increase in the number of Internet service providers increases the supply of such services; the formation of women's professional basketball leagues increases the supply of women's professional basketball games.

GHaNGEIN

supply A

change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right.

change in qUANTITY

supplied A

movement from one point to another on a fixed supply curve.

Changes in Quantity Supplied

The distinction between a change in su ly and a change in quantity su lied parallels the distinction between a change in demand and a change in quantity demanded. Because supply is a schedule or curve, a change in supply means a change in the entire schedule and a shift of the entire curve. An increase in supply shifts the curve to the right; a decrease in supply shifts it to the left. The cause of a change in supply is a change in one or more of the determinants of supply.

In contrast, a change in quantity supplied is a movement from one point to another on a fixed supply curve. The cause of such a movement is a change in the price of the specific product being considered. In Table -6, a decline in the price of corn from $5 to $4 decreases the quantity of corn supplied per week from 12,000 to 10,000 bushels. This is a change in quantity supplied, not a change in supply. Su -ply is the full schedule of prices and quantities shown, and this schedule does not change when price changes.

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