The
following diagrams show the
changes in supply due to other than price factor. D is the initial demand and S is the initial supply. Supply
curve shifts from S to S1
Reasons
for shift of supply curve
There are many “other than price
factors which determine the supply”, they are (1) Costs or
production (2) Taxes and subsidies (3) Weather conditions and seasons (4)
Technological advancement (5) Laws and regulations (6) Number of suppliers
(7) Availability of stocks (unexpected events).
(1)
Costs of production. When the prices of factors of production
increase the suppliers would not be able to produce as much as they did before
and the supply curve shift leftwards and vice versa.
(2)
Taxes and subsidies. A tax on a commodity may be regarded as an increase
in the cost and supply reduces thus the supply curve shift towards left.
A subsidy would lower the cost and the suppliers can increase their
supply, so the supply curve shifts towards left.
(3)
Weather conditions and seasons. Supply of agricultural products is
seriously affected by variations in weather conditions and seasons.
This would cause an increase in the cost of production of commodities
depending on agricultural output. So a bad harvest means a decrease in
supply and the supply curve move towards left, and a bumper harvest
will have an opposite effect.
(4)
Technological progress. Technological progress refers to improvements in
the overall performances of factors of production in quality and quantity.
(5)
Laws and regulations. The amount of goods supplied to the market can be
affected by the country’s laws and regulations. [Industrial quota and price
control will affect the supply].
(6)
Number of suppliers. When the number of suppliers increase there would be
an increase in the supply to the market [In case of monopoly (single
producer) situation, supply is often reduced so as to create an artificial
shortage to increase prices]
(7)
Availability of stocks (unexpected events). Excess or
shortage stock of goods can also make changes in the supply. War or
natural disasters will also adversely affect the supply of goods.
Back
to Home Page Click here