What can change supply?
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There are typically said to be five things that can change supply. Please note that the price for which the good or service can be sold is not something that can change supply. It cannot move the supply curve. Instead, it just causes a movement along the curve. This is called a change in quantity supplied. Let us look at the five:
- Technology. An increase in technology can make it possible for a firm to make more of a given product at a given price. This is an increase in supply.
- Number of sellers. The more firms there are that sell a good, the greater the supply of that good at a given price.
- Sellers’ expectations. If a seller expects that the price of their product will change in the near future, it will impact how much they produce. For example, if I am growing wheat and I think that the price will increase in three months, I will not sell now but will hold my wheat. This reduces supply in the present.
- Other prices. Imagine that I can make t-shirts or shorts in my factory. The price of shorts goes way up. I will stop making as many t-shirts and will instead make more shorts. Thus, the supply of shorts will increase.
- Resource prices. These are the things that I need to make my product. If their prices go down, I will want to make more of the good at the same sale price because I am making more profit.
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