D2 Influences on Supply
Supply refers to the willingness and ability of suppliers to produce and supply products at different price levels. The supply curve illustrates the relationship between price and quantity supplied. Supply should increase as price increases. As you can see on the diagram to the right, at $100, supply is 10 and at 700, supply is 70.
Left Shift in Supply
Unfavourable conditions may make it more challenging or undesirable for producers to supply goods and services and therefore we will see a reduction in supply of goods and services at each price. This would be represented by a left shift of the supply curve.
As we can see in the diagram to the left, at $700, supply shifts from 70 to 50. At $300, supply shifts from 30 to 10.
Factors that may cause a left shift in supply include a rise in production cost, lack of availability of raw materials and issues with logistics.
Right Shift in Supply
Favourable conditions may make it easier or more desirable for producers to supply goods and services and therefore we would see an increase in the quantity of goods and services supplied at each price.
As we can see in the diagram on the right. At $500, supply has increased from 50 to 70. At $100, supply has increased from 10 to 30.
Factors that may cause a right shift in supply include reduction in production costs, ease of access to raw materials and increased government support such as subsidies or tax breaks.
