Question

State what causes a shift in the supply curve and show it diagrammatically.

Answer 1

When the quantity supplied of a good changes due to factors other than its own price, it is called a change in supply.

• An increase in supply shifts the supply curve to the right, from S₁S₁ to S₂S₂. This can happen because of better production methods, a drop in input costs, or a decrease in taxes like excise duty.
• A decrease in supply causes the supply curve to move left, from S₁S₁ to S₃S₃. This may occur due to higher input prices, a rise in taxes, or an increase in the prices of alternative goods.