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Exploring how changes in technology or costs affect how much firms produce.
Imagine you run a lemonade stand. If the price of lemons suddenly doubled, would you still want to make as many cups? What if you found a magic juicer that worked twice as fast? These changes are the 'invisible hands' that move the entire market.
In economics, we distinguish between moving along a curve and the curve itself moving. A Shift in Supply occurs when a factor other than price changes. When the entire curve moves to the right (), it means firms are willing to sell more at every price point. When it moves to the left (), they sell less. Think of the curve as a sliding door: Right is More, Left is Less.
Quick Check
If a supply curve shifts to the right, does the business want to produce more or less at the same price?
Answer
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The most common shifter is the cost of inputs—the materials, labor, and energy used to make a product. If the price of sugar goes up, a candy factory's profit per bar goes down. To stay profitable, they must reduce production, shifting the supply curve to the left. Conversely, if the government lowers taxes on businesses, it's like a discount on production, shifting supply to the right.
1. A pizza shop sells pies for $10 each. 2. Suddenly, the price of cheese (an input) drops by 50%. 3. The shop can now make more profit on every pizza. 4. Result: The shop increases production. The supply curve shifts to the right.
Quick Check
If a worker's hourly wage increases, what happens to the supply curve for the goods they make?
Answer
It shifts to the left because production costs have increased.
Two other major shifters are Technology and External Shocks. New technology almost always shifts supply to the right because it makes production faster and cheaper. On the flip side, Natural Disasters or bad weather are 'negative shocks.' If a frost kills half the orange crop in Florida, the supply of orange juice shifts sharply to the left because the physical resources are gone.
1. A tech company uses manual labor to snap screens onto phones. 2. They invent a new AI Robot that snaps screens 5x faster with zero errors. 3. The cost per phone drops from to . 4. The company can now supply many more phones at the same market price. The supply curve shifts right.
Imagine a year where two things happen at once: 1. A new, high-speed bean roaster is invented (Technology improves). 2. A massive hurricane hits the world's largest coffee plantations (Natural disaster).
To find the final shift, we must compare the 'strength' of each event. If the hurricane damage is worse than the benefit of the roaster, the net supply will still shift left.
Which of the following would cause a supply curve to shift to the LEFT?
How does a 'Rightward Shift' affect the quantity supplied at a specific price ?
A new invention that speeds up production will always shift the supply curve to the right.
Review Tomorrow
In 24 hours, try to list the four main 'shifters' of supply (Costs, Tech, Nature, Taxes) and draw a simple graph showing a leftward shift.
Practice Activity
Look at an item in your room. Research one 'input' needed to make it. If that input became scarce, how would the supply curve for your item change?