Chapter 2: Supply and Demand: You Have What Consumers Want
Figure 2-3: Changes in quantity supplied.
Price changes cause changes in quantity supplied represented by movements along the supply curve. When the price of dog treats decreases from $5.00 to $1.00 in Figure 2-3, the quantity supplied decreases from 650 to 50 boxes per week — a movement from point C to point D on the supply curve. This movement indicates that a direct relationship exists between price and quantity supplied: Price and quantity supplied move in the same direction.
Shifting the supply curve When economists focus on the relationship between price and quantity supplied, a lot of other things are held constant, such as production costs, technology, and the prices of goods producers consider related. When any one of these things changes, the entire supply curve shifts. If an increase in supply occurs, the curve shifts to the right, as illustrated in Figure 2-4. In this case, an increase in supply shifted the curve from S0 to S1. As a result, more dog treats are provided at every possible price. For example, at a price of $5.00, 750 boxes of dog treats are provided each week instead of 650.
A rightward shift in the supply curve always indicates an increase in supply, while a leftward shift in the curve indicates a decrease in supply.
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