1. Determinants of Supply (Shifters)
In constructing a supply curve, it is assumed that price is the most significant influence on the quantity supplied of any product.
But other factors (“other things equal”) can and do affect supply.
These factors or determinants (other than price,) cause a change in supply and shift the entire supply curve.

2. 6 Non-Price Determinants of Supply (Shifters)
#1 Resource Prices: The prices of the resources or inputs used in the production process help determine the costs of production.
Higher resource prices raise production costs and reduce profits lessening the incentive to take risks, therefore decreasing supply (shift the supply curve to the left.) A “Supply Shock” may substantially drive up an input price.
In contrast, lower resource prices reduce production costs and increase profits, therefore increasing supply (shift to the right.)
Cost of a barrel of crude oil is a good example of this determinant.

3. 6 Non-Price Determinants of Supply (Shifters)
#2 Technology: Improvements in technology enable firms to produce units of output with fewer resources. 90’s “I.T.” boom led to substantial increases in productivity.
Fewer resources equates to a lower cost of production raising profit and increasing the supply of the product (shift right.)
Removing technology (D.D.T. in 1972) is highly unusual, but would increase the cost of production and decreasing supply (shift left.)

4. 6 Non-Price Determinants of Supply (Shifters)
#3 Taxes and Subsidies: Businesses count taxes as a cost of production (Role of Government ? )
An increase in sales, property or corporate taxes will increase production costs and therefore reduce supply.
If the government subsidizes the production of a good (“taxes in reverse”) it lowers the producers’ costs and increases supply (shift left).
Tax cuts are a major component of expansionary fiscal policy and are typically adhered to by conservatives and supply-siders.
Reaganomics (81-89) lowered tax rates significantly and the economy grew by an average GDP of 3.4%.
Believe excessive tax rates can reduce tax revenue.

5. 6 Non-Price determinants of Supply (Shifters)
#4 Prices of Other Goods: Firms that produce a particular product can sometimes use their plant to produce alternative goods.
Firms may shift production to a higher priced good to reap greater profits (substitution in production.)
Corn production up 24% and Soybean production down 18%, “The Ethanol Effect.”

6. 6 Non-Price Determinants of Supply (Shifters)
#5 Future Price Expectations of Producers: Changes in expectations about the future price of a product may affect the producer’s current willingness to supply that product.
It is difficult to generalize how future price expectations may impact current supply.
If wheat farmers expect prices to go up in the near future they may hold back some of their current harvest, decreasing supply.
On the other hand, expectations that a price will increase on a product may induce firms to add another shift of workers or expand their production facilities, causing current supply to increase.

7. 6 Non-Price Determinants of Supply (Shifters)
#6 Number of Sellers: Other things equal, the larger the number of suppliers, the greater the market supply.
As more firms enter an industry, the supply curve shifts to the right.
The smaller the number of firms in the industry, the less the market supply and the curve shifts to the left.
Pure Competition involves numerous independent firms (price takers) while a monopoly involves one firm (price maker).
Many industries are oligopolies, where a few major firms dominate the market ( 3 or 4 firms produce 80%).