1. Mr. Barnett AP Economics University High
Supply Shifts
Mr. Barnett
AP Economics
University High

2. Determinants of Supply
Changes that raise/reduces the quantity supplied at every price
Input Prices
Technology
Expectations
Physical Availability of Resources
Number of Sellers
An increase in supply is represented by a shift to the right for supply – equilibrium price will decrease, quantity will increase
A decrease in supply is represented by a shift to the left for supply – equilibrium price will increase, quantity will decrease

3. Determinants of Supply
Input Prices
Sellers use various inputs (factors of production)
When the price of one or more input rises, producing the good or service becomes less profitable
Firms supply less of the good
May even shut down production if input prices rise too high
What costs might rise in our lemonade example?

4. Determinants of Supply
Technology
A technological improvement can reduce the cost of production – raising profit and supply
Supply increases and price will decrease

5. Determinants of Supply
Future Expectations
Future expectations affect suppliers too
If you think the price of your good will be higher in the future you might store some of your product for the future
This decreases supply, raising prices and decreasing quantity
If you think the future price will be lower, you will sell more of your product now
Increases supply, decreases prices and increases quantity

6. Determinants of Supply
Physical Availability of Resouces
If more resources are found or become available, the supply will increase
This will cause the price to decrease and quantity to increase
If resources become unobtainable, the supply will decrease
This will cause the price to increase, and quantity to decrease

7. Determinants of Supply
Number of Suppliers
Suppliers will enter or exit a market because of numerous reasons
An increase in suppliers will increase the supply of the good or service
A decrease in suppliers will decrease supply