Movement Along a Supply Curve: Videos & Practice Problems

Understanding supply involves recognizing that a change in price results in a movement along the supply curve, indicating a change in quantity supplied, not a shift in the curve itself. Factors that shift supply include changes in production costs or technology, leading to a new supply curve. An increase in supply shifts the curve to the right, while a decrease shifts it to the left. This distinction between quantity supplied and supply is crucial for analyzing market dynamics and achieving market equilibrium.

Shifting Supply - Warning!

Understanding the factors that shift supply is crucial in economics. It's important to note that a change in price does not shift the supply curve itself; rather, it results in a movement along the existing supply curve. The axes of the graph represent price and quantity, and any change in price leads to a change in the quantity supplied, not a new supply curve.

For instance, if we start at an original price \( P_1 \) and original quantity \( Q_1 \), and the price decreases to \( P_2 \), we do not redraw the supply curve. Instead, we move along the existing curve to a lower quantity supplied, consistent with the law of supply, which states that as prices decrease, the quantity supplied also decreases.

In contrast, when we discuss factors that shift the supply curve, we are referring to changes that affect the overall supply of a good or service. For example, if a positive change occurs in supply, such as improved production technology, the supply curve shifts to the right, creating a new supply curve, which we can label as Supply 2, parallel to the original Supply 1. This shift indicates an increase in supply at every price level.

It is essential to differentiate between a change in quantity supplied, which occurs due to price changes, and a change in supply, which results from other determinants. When analyzing these shifts, we assume all other factors remain constant, allowing us to isolate the impact of the specific change in question. This principle of "all else equal" is fundamental in economic analysis, ensuring clarity in understanding how various factors influence supply.

Here’s what students ask on this topic:

What causes a movement along the supply curve?

A movement along the supply curve is caused by a change in the price of the good or service. When the price increases, the quantity supplied increases, and when the price decreases, the quantity supplied decreases. This movement is represented by a shift from one point to another on the same supply curve, indicating a change in quantity supplied, not a shift in the supply curve itself.

How does a change in price affect the supply curve?

A change in price does not shift the supply curve; instead, it results in a movement along the supply curve. If the price of a good increases, suppliers are willing to produce and sell more, leading to a movement up the supply curve. Conversely, if the price decreases, the quantity supplied decreases, leading to a movement down the supply curve. The supply curve itself remains unchanged.

What is the difference between a movement along the supply curve and a shift in the supply curve?

A movement along the supply curve occurs when there is a change in the price of the good, leading to a change in the quantity supplied. This is represented by a movement from one point to another on the same supply curve. A shift in the supply curve, however, occurs when there is a change in other factors such as production costs, technology, or number of suppliers. This results in a new supply curve being drawn, either to the right (increase in supply) or to the left (decrease in supply).

What factors can cause the supply curve to shift?

Several factors can cause the supply curve to shift, including changes in production costs, technological advancements, number of suppliers, expectations of future prices, and government policies such as taxes and subsidies. An increase in supply shifts the supply curve to the right, while a decrease in supply shifts it to the left. These shifts indicate a change in supply, not just a change in quantity supplied.

How do you distinguish between a change in quantity supplied and a change in supply?

A change in quantity supplied is a movement along the supply curve due to a change in the price of the good. It reflects how much more or less of the good is supplied at different prices. A change in supply, on the other hand, is a shift of the entire supply curve due to changes in factors other than the price of the good, such as production costs or technology. This shift indicates a new relationship between price and quantity supplied.