Is the following considered a change in supply or a change in quantity supplied and why? a) Cold weather in California destroys a lot of the corn crop resulting in less corn on the market. b) The...
Is the following considered a change in supply or a change in quantity supplied and why?
a) Cold weather in California destroys a lot of the corn crop resulting in less corn on the market.
b) The price of fur goes up. This causes manufacturers of fur jackets to decrease production.
If I understand the two scenarios that you are presenting here, they would both be examples of changes in supply. The first one is definitely a change in supply and the second one appears to be, depending on what we mean by the “price of fur.”
Supply is defined as the amount of a product that producers are willing and able to produce at a given sale price. A change in supply cannot be caused by a change in the sale price of the product (the price for which the producer can sell the product). A change that is caused by the sale price of the product is a change in quantity supplied.
In the first scenario, the price of corn is not changing. Instead, the weather has had an impact on how much corn exists at all. This will cause a change in supply because sellers will not be able to produce as much corn as they previously did. There is less corn total, so there will be less for sale at any given price. This is a change in supply.
In the second scenario, the price has changed, but (as I understand it) it is not the cost that the producers sell their jackets for. Instead, it is the cost of fur, one of their inputs, that has changed. When the price of inputs goes up, producers will want to sell less of their product at any given price. This is because the producers’ costs have gone up and they will make less profit at any given price.
For these reasons, both of these scenarios represent changes in supply, not changes in quantity supplied.