Shifts in the Supply Curve

So just like we did with demand, we're going to do the same thing with supply and thinking of shifts to the right as good things happening for supply and shift to the left as bad things happening for the supply of our product. Right? So when we have something good happen for the supply of the product, we are going to shift to the right. So an example something good that could happen. What if the inputs, the things that we use to create the product? What if that gets cheaper? That's gonna shift our supply line to the right? Cool. So that's a good thing for the supply. It will shift to the right ear and I just want to note, make this quick note right? If we have this price and this is our quantity, we're at this price right here, P one notice price doesn't change, but what happens at this price? Originally we were gonna be at this quantity right here supplying this quantity but now since whatever factor caused the supply to shift to the right, such as cheaper inputs then at that same price we're willing to create that much more quantity supplied. Right? So notice we're keeping the price constant there, but the quantity supply is increasing because the supply curve shifted, so just like that, let's do the opposite with the ship shifting left, right. This is when a bad thing happens to supply, like the input prices going up, right, So we would shift to the left in this case and I'll draw a graph, something like that right and we have effective shifted to the left here. Same discussion there. Except now, we would have a smaller quantity supplied at the same price. Cool, So this is how we're going to be shifting. Now, let's learn about what are those factors that are gonna be shifting our supply? All right, let's do it.

one factor that can shift our supply is the cost of the inputs for the product, So changes in the price of the inputs, such as the cost of labor or the cost of the raw materials getting put into the product, um they're gonna affect the good supply. So this should kind of work logically that if the input prices are increasing for our product, then the supply of our product is going to decrease, right? These are inversely proportional. One goes up, the other goes down. So you can imagine if the input prices were to go down, then the supply would increase and that kind of makes sense, right? If it got cheaper to make it, we're gonna make more of them. All right? So, um and I want to make this note right here, just like I've been making is that we're not making a change in price here, right? We are talking about prices, but this isn't a change in the price of the product of the final product we're selling, right? This is a change in the input prices, what we're putting into the product. Cool. So here's some examples of of input price changes. One, a very common one is minimum wages increase. So if minimum wage increases, that means that our supply will decrease, Right? So let's say wages up supply down, right? Um and that's pretty general, right? That could work in pretty much any industry, if the labor cost goes up, you'll see the supply decrease the price of gasoline. This is a common input to a lot of product making right? We need gasoline to fuel our machines or whatever. So if the price of gas goes up being an input into our product to run our machines or whatever it's gonna be, um we're gonna see the supply go down and last year I have price of microchips. So let's say the price of microchips decreases. Oh and in the previous one I actually wrote gasoline decreases. But you can see that it's just vice versa. Right? If the price of gas to go down then that means our inputs got cheaper. So our supply would go up. Same thing here with price of microchips. Let's say we make computers. So the price of the microchip goes down the chip. Am I in the way here? The price of the chip goes down. Then the supply, let's say of computers comp is gonna go up right, the inputs for the computer got cheaper, so the supply is gonna increase. Let's go ahead and do an example

All right, let's check out this example if the cost of plastic which is necessary for the production of the noodle cooling chopsticks rises, what will happen to the supply curve in this industry? So it's telling us that the cost of plastic is going up and it's gonna be a little more expensive to make these really cool semi impractical noodle cooling chopsticks. Right? So, since our input prices are rising, we're gonna see the supply of the I'll just put chop the supply of the chopsticks is going to go down, right. It's more expensive to make them, so the supply is going to shift to the left. This is a bad thing for the industry, we're gonna end up somewhere, try and make it parallel somewhere over here, right? We've shifted to the left. Cool. So it's a bad thing happening for the suppliers. We're gonna shift to the left. Alright, pretty easy one there. Why don't we go ahead to the next one?

So changes in levels of technology are also going to affect the supply for a good. Um Generally we're going to see technology only increasing. Right, are the availability of technology is usually only going up? So I've never seen a problem where technology decreases. I don't know maybe like a Y. Two K. Problem or something. But the idea here is if technology increases uh supply will increase, Right? So this kinda is it kinda goes hand in hand with the input prices, right? This is kind of it's just making production more, more smooth, more efficient. So we're gonna be able to create more of the product. Right. So pretty much pretty simple idea here. Uh Let's look at some examples of technology increases. We've got wireless technology coming out. Right? So we've seen that in recent years, the industrial revolution was a huge increase in productivity based on new technology. And how about one movie rental? The movie rental industry saw a great change in technology when netflix came out, it totally increased the supply of being able to rent movies right before we had to go to a blockbuster, go to a store and pick out a movie. Now, all the movies were available online or at least a really good selection of movies available online through these streaming services. Right? So these basically expanded the supply based on the technology increases. Cool, pretty simple one. Let's go ahead and do an example

Alright, so a new super pizza oven has revolutionized the time it takes to bake a stuffed crust pizza, stuffed crust pizzas can be hot and ready in less than one minute, wow, What happens to the supply of stuffed crust pizzas? So in this question, what we have is an increase in technology, Right? Technology has gotten better in the pizza industry. So I put tech up and when technology gets better, that's a good thing for the industry, right? That makes our supply go up as well. So we are going to shift to the right, We'll have a new curve here. Oops, and that will be our new supply curve shifted to the right. Cool. So technology increased supply increased easy enough. Alright, let's move on to the next one.

now, let's see how taxes and subsidies can affect the supply for a good. So, let's start with taxes. Um when we think about taxes from the business standpoint, it's just another cost, Right? So we can almost think of this as an increase in the input cost like we already discussed, Right? So it's an increased cost. Taxes going up. Supply will decrease, right? It's like our costs are going up, so we are going to supply less. They have that inversely proportional relationship and the opposite here, subsidies are basically like a reverse tax. That's why instead of paying the government money, the government gives you money. Um, So when subsidies increase, well then supplies supply is going to increase as well. So here we have a directly proportional relationship. Right? So this is a good thing, the government's giving us money. It's a good thing for supply. So, here's some examples of some taxes and subsidies you might see. So property taxes, if you see property taxes going up, you can imagine that that's going to affect the supply for business, The supply is going to decrease about school funding. The government gives a lot of money to to universities and public schools. What if the funding increases, right? If the funding increases, then we're going to see the supply of public education increase as well. And a very common place. You see subsidies is in the agricultural business, a lot of times the government will subsidize farmers because they want to make sure that there is food for the citizens. So you'll see that there are agricultural subsidies um, given quite often. So you can imagine that if a subsidy increases or if a new subsidy arises in the industry, you're gonna see supply increase as well. Cool, So let's go ahead and do an example.

All right. The new president of a well known country has decided to slash funding for the arts. What will happen to the supply of arts education? So, let's see what happens here. So, we're this funding for the arts. It's like a subsidy that arts education was receiving, right? So you can imagine that the um subsidy here being the funding from the government is decreasing. So since the subsidy is decreasing, we are going to see supply decrease as well. So if this was our original supply curve for the supply of arts education, this could be our new supply curve here to the left. Let me draw a little more parallel. Cool. So what has happened is we've moved to the left. It was a bad thing for arts education for this new president to come into office. Alright, so pretty easy. You saw the subsidy decrease, so the supply decreased as well. Alright, let's move on.

So we saw how the change in price of related products, like substitutes and complements can affect demand. Now we're gonna see how prices of related products can affect supply as well. So in this case we're gonna be talking about substitutes in production and this is different from substitutes, like we talked about with demand. Um with the man we're talking about substitutes in consumption, right? Where instead of buying butter, we're gonna buy margarine because to us it didn't make a difference. Now, we're talking about substitutes in production, which means our factories are usually set up to make more than one thing. So instead of making this one product, when we hear that another product is more has a price increase, maybe we'll make that other product instead of this product. Right. Does that make sense? We'll do some examples here. So the idea is that when the price of a substitute in production something else that we could be making instead um when that price increases for the substitute and production, the supply of the product will decrease. Let me do this. Right? Alright. So we've got an inversely proportional relationship here. And note again that this is not a change in the price of our product, it's a change in the price of a related product, not a change in price. Right? When we have that change in price, that is when we just move along the supply curve, but in this case it's not a price change of our product. It's a price change of another product. So here's some examples of possible substitutes in production, There's no hard and fast rule. But these are things that could probably be produced in the same factory with minimal changes to the factory. Um, so the first one will be like basketballs and volleyballs. So let's say that the price on the market, right? The price of a basketball goes up. So this is the price that consumers are paying for basketballs goes up. Then the supply of volleyballs is going to go down, right, assuming that they are substitutes in production, which we're gonna assume in these examples. Right? So instead of making bass, excuse me, instead of making volleyballs now, since the price went up for basketball, they're gonna stop making volleyballs and make basketballs instead. Same thing with corn and wheat. Let's do the opposite this time. Let's say that the price of corn went down. What's gonna happen to wheat assuming their substitutes in production, which this probably makes sense, right? Because a farmer could grow corn or wheat on the same land probably, I guess, I don't know too much about farming. It's not my expertise. But let's go ahead and say if the price of corn were to go down there substitutes in production, then we're gonna see the supply of wheat going up, Right. That's because the farmers are gonna say, hey, corn is not as profitable anymore. Let's go ahead and make wheat instead. Cool, I've got one more here behind me, pizzas and calzones, same kind of idea, right? If the price of pizzas were to go up, people would make less calzones and make more pizzas so the supply of calzones is gonna go down. So notice how those price changes are not in the product that we're talking about the supply, it's in the other substitute. Uh the substitute in production. Cool. Let's try an example.

Alright, let's try this one. A company that produces peanut butter is also equipped to make almond butter. The company noticed that the prices of almond butter are rising. So a what will happen to the supply of peanut butter and be what will happen to the supply of almond butter? Let's start with a what will happen to the supply of peanut butter. So we know that they are substitutes in production. They made the reference in the question that they are also equipped to make almond butter. Um So we know that the price of almond butter is rising, right? So since the price of almond butter is rising, they're not gonna make peanut butter anymore. They're gonna say, hey, I'd rather make almond butter than peanut butter. So they're gonna switch their production, they're gonna substitute it to making almond butter instead. So the supply is gonna go down for peanut butter, right? Um So let's go ahead and do this on the graph. Right? So in the in the market for peanut butter, this was a bad thing for peanut butter because they're gonna prefer to make almond butter instead. So we are going to have a shift to the left. So I'm gonna draw a new demand new supply curve here to the left of this one, and that will be our shift to the left for peanut butter. Cool, alright, let's try the same thing with almond butter. So now let's think about this. So let me get out of the way. So we've had a price increase in almond butter and hopefully you guys remember this trick from when we were studying demand, but we're talking about the supply of almond butter and all that's happened is a price change of almond butter, right? So nothing else has happened in the market for almond butter other than the price has increased. So we're not going to draw a new supply curve, right? We're actually just moving along the supply curve. So when the question asked, what will happen to the supply of almond butter, nothing's gonna happen. We're just gonna move the quantity supplied. So let's say we started here at this point and this is our price and this is our quantity axis, right? So we had a price here, the quantity here um and it told us that the price of almond butter increased. So now we've got a price up here, oops, oops, get my pen back and the quantity out here, Right? So the price increase and this goes along with our law of supply, that since the price of the product increase, the quantity supplied is going to increase as well. Right? So hopefully that one didn't catch you because we've had a couple of tricks like that already when we're studying demand and if it did make sure you really focus on that, right, those changes in price of a product are only going to shift us along the line. Alright, cool. Let's move on to the next topic

another factor that can shift supply is the producer's expectations about future prices. So, we saw this with demand, right? Where there was expectations the consumers had about future prices. Well, the producers can also have expectations just the same. Um We're gonna see there is a little trick here, it's not as straightforward, but in general, what we're going to say is if suppliers expect prices to increase in the future, the supply for the good today will decrease. Okay? And this is generally um what happens? But I wanna put, let's say a big bold question mark out here. All right. And I'm gonna circle it because I'm going to discuss that once we get to the example, that there could be a situation where supply is actually going to increase, but they would have to be very specific to tell us that. Right? So in general, we're gonna see that when the expected price is increasing in the future, we're going to decrease the supply today. Right? So, I mean, producer expected it's hard to think of examples, it's really just that they're expecting the prices to change, Right? So if they're expecting the price to change, then we're going to see a problem like this. Okay, I think we're going to get a lot of value out of this example and you'll see how the two different ways we can interpret this come into play. All right, So let's move on to the example

Alright. So here we go. Senior coffee makes artisanal coffees in an underdeveloped part of town when all of a sudden a relentless mob of hipsters moves into the neighborhood, senor coffee knows that hipsters will pay way too much for artisanal coffee and expects future prices in the artisanal coffee industry to rise. So there we go. We've gotten that note right there expected future prices in the artisanal coffee industry to rise. So prices are expected to rise. The expectation of price is that it will go up? Alright. So remember I said this one could be a little tricky, but in general what we will see is that supply would decrease now because of the expected price increase. And that kind of makes sense right? Oh the price is gonna be higher later. Let me hold my stuff now and sell it when the price goes up. So let's look at A. And B. Here and you can see how it could be possible that supply could actually shift to the right in this situation. So in a. What happens if senor coffee stores some of his current production for sale when price increases or when prices increase. And this is what you'll usually see is this example where where we're gonna have supply decreasing currently. Um because they're waiting for the price increase, right? So in this situation when he puts some of his current production into storage, we're gonna see the shift to the left. All right. And this is generally what you're gonna see is this shift to the left. But I wanted to expose you to this other one, just so it doesn't catch you off guard if your teacher wants to throw you a curve ball, right. So we had our supply shifting to the left there because he puts it in storage. But what happens to the supply of artisanal coffee if senor coffee hires another worker to anticipate demand. So now he's not putting his stuff away, he's actually producing more because he's expecting that higher price. And in that situation we're gonna shift to the right. So notice right? We could have shifted to the left or to the right, and it's all how the problem was stated, but they would have to be very explicit if it was this second situation of the hiring of a worker, right? In general, what you're gonna see is this we're gonna see this happening over here, right? And I'm gonna circle that one just because that is what I would expect you to see. I just wanted to expose you to this because it could be a trick question, right? So that is how expected prices can affect the supply here. Cool. Alright, let's move on.

So just like we saw the number of consumers in the market can shift demand, the number of suppliers in the market can shift supply. So pretty straightforward if the amount of suppliers in the market increases the supply for that good will also increase, right? And that makes sense, right? There's more people making the product, so there's just gonna be more supply of the product. They're directly proportional the suppliers, the amount of suppliers going up and our supply is going up. Cool. So here's some examples of some changes in the number of suppliers. A really good one was the W. M. B. A. When the W. N. B. A. Was created, the supply of of women's basketball games went up right, There was an increase in the number of suppliers of women's basketball games and now the supply of women's basketball games went up. So what if like this other example, let's say tattoo parlors opened up in every corner of your town right now there's a lot of tattoo parlors, so you imagine the supply of tattoos has also gone up just a random example there. Cool. So this one's pretty straightforward. Let's go ahead and try this on the graph.

Alright, so we've got an example here, jimmy freezer sells ice cream in a small town. All of a sudden, it seems like everybody and their moms are selling ice cream on every corner. What has happened to the supply of ice cream? So in this situation, what we see is an increase in the number of suppliers, Right? So the number of suppliers is up and when the number of suppliers go up, is that a good thing for the supply of the product or a bad thing for the supply of product? That sounds like a good thing? Right, logically thinking, even before our discussion we just had, so the number of suppliers go up, we're gonna see the supply of the product increase as well. So that's our original SaPO. I for ice cream, we would draw a new one to the right, because this was a good thing for supply of ice cream. Right? So we've shifted to the right, and that is because the number of suppliers of ice cream increase, causing our supply to increase. Cool, Alright, let's move on then.

Alright, so another factor that can shift supply is events in nature. Let's check it out here. So nature can have positive or negative effects on supply. Right. It's kind of hard to gauge without examples, but the idea is, if there's some sort of positive event in nature, um, that's going to increase the supply for the good, right? We've got this directly proportional relationship where it's a positive event in nature, good thing happening in nature, good for the supply. So maybe like you run a wind farm or something and it's been really windy. Extraordinarily windy. The supply of energy from your wind farm is gonna increase, Right? Something like that. Um, so we basically break down on events in nature into two things, good weather and bad weather. Right? So there's good weather, That's a good thing, right? That's gonna be good for supply. There's bad weather, that's a bad thing. It's gonna be bad for supply. Right. So, we got to get the context from the question and let's go ahead and do an example. So, we see these on the graphs

Alright so let's try this example. It seems like all season long, the ideal amount of sunshine and rain has graced the farmlands in Iowa. So how will this affect the supply of wheat. So I guess we're assuming Iowa is making a lot of wheat. I don't know if that's true or not but let's go ahead and say that they are all right. So um we have a positive event in nature. So I'm gonna say nature up, right, that's a good thing in nature. Then we are going to say that our supply will increase in this case, right? The sunshine and the rain being perfect. It's gonna make the crop extraordinary this year, right? Something like that. So we're going to see that with the sunshine. We're going to shift our supply curve to the right, just like that. And that is because a good thing has happened for our product now. What about b what if instead of sunshine and rain, a meteor struck a truck, a different farm in Iowa every day of the season. Man Iowa would have been really unlucky that year. But you could imagine that this is a negative event in nature, right? So this is nature. I'm gonna put nature down supply down. Right? So this is a negative thing happening in nature. This is a bad thing for the supply of wheat. So we are going to shift to the left, right? So you can imagine that these are pretty easy to catch, right? You're gonna see whether it's a good thing or a bad thing based on the context in the question. So this will shift our supply to the left there. Cool, Alright. That one's pretty easy. Let's go ahead and move on.