Ch6 - factors that may shift the supply curve

• Factors that may cause a shift in supply curve(PISTN)

  • Costs of production
  • Changes in technology
  • Indirect taxes
  • Subsidies
  • Natural factors (nature disasters and weather)
• Cost of production

  Wages, raw materials, energy, rent and machinery
• If production cost rises

  The supply will fall
• If production cost rises

  There will be a shift of the supply curve to the left from S1 to S2
• If production cost rises

  The quantity supplied will fall from q1 to q2
• If production cost falls

  The supply will rise
• If production cost falls

  There will be a shift of the supply curve to the right from S1 to S2
• If production cost falls

  The quantity supplied will rise from q1 to q3
• New technology

  More efficient and can therefore reduce cost of production
• With new technology

  Help to reduce cost of production
• With new technology

  The supply will rise
• With new technology

  A shift of the supply curve to the right from S1 to S2
• With new technology

  The quantity supplied will rise from q1 to q3
• Indirect taxes


  Taxes levied on spending such as VAT
• If indirect taxes are imposed/increased

  The supply will fall
• If indirect taxes are imposed/increased

  There will be a shift of the supply curve to the left from S1 to S2
• If indirect taxes are imposed/increased

  The quantity supplied will fall from q1 to q2
• If indirect taxes are reduced

  The supply will rise
• If indirect taxes are reduced

  There will be a shift of the supply curve to the right from S1 to S2
• If indirect taxes are reduced

  The quantity supplied will rise from q1 to q3
• Subsidies

  Money paid by a government or organisation to make prices lower, reduce the cost of producing goods or providing services in order to encourage production of a certain good
• If the government grants a subsidy on a product

  The supply will increase (because the subsidies help to reduce production costs)
• If the government grants a subsidy on a product

  There will be a shift of the supply curve to the right from S1 to S2
• If the government grants a subsidy on a product

  The quantity supplied will rise from q1 to q3
• Natural factors

  Weather, natural disasters, or the presence of pests or diseases
• If natural disasters

  The supply will fall
• If natural disasters

  There will be a shift of the supply curve to the left from S1 to S2
• If natural disasters

  The quantity supplied will fall from q1 to q2