Factor causing Shift in Supply Curve || Theory of Consumer Behavior || Bcis Notes

The factor causing Shift in Supply Curve

There are different factors causing a shift in the supply curve. Some of them are discussed below:
Commodity Prices: The quantity supplied can reduce if there is an increase in the price of another commodity because more resources will be set aside to produce bigger quantities of the commodity with a higher profit margin. Producers also increase the amount supplied for the commodity at high prices in order to make more profit.

Cost of Production: Quantity supplied can increase as a result of a reduced cost in the production of a commodity. This increase will result in the downward shift of the supply curve toward the right. The increased cost of production limits the quantity supplied by producers to the market at any price, making the supply curve to move toward the left.

Taxes and Subsidies: The government plays a vital role in determining the quantity supplied in the market. If the government levies taxes on producers, the production cost increases, leading to a drop in supply. Higher taxation increases the price of a commodity in the market, resulting in consumers buying less, in turn lowering the supply. Government subsidies reduce the cost of production, thus firms are able to make more commodities for the market. The supply curve shifts to the right, depending on the value of the subsidy.

Number of Suppliers: The overall quantity of a commodity supplied is determined by the number of producers in a market. The entry of new firms increases the quantity supplied, leading to a fall in market prices. If suppliers deliberately withhold supplies to the market using quotas, prices go up. Having many firms in the market increases the amount supplied and expands customers’ choices.

Technology: Technology advances in industries can rapidly increase production and improve efficiency. Technology lowers the cost of production because the amount of time spent producing commodities can be reduced. Rapid production also lowers consumer prices, resulting in an increase in supply.

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