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What Is a Change in Supply?

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  • Written By: Osmand Vitez
  • Edited By: Kristen Osborne
  • Last Modified Date: 27 August 2014
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A change in supply is an economic concept that involves the supply curve. A part of the overall supply and demand graph, the supply curve is another basic economic concept. A change in supply can shift the curve to the right or left on the graph, depending on the cause relating to the change. For example, current information technology allows companies to produce a greater supply of smartphones. As more companies enter this market and the supply of smartphones increases, the supply curve will shift to the right. Conversely, the supply for standard cell phones will probably decrease due to lower production, shifting the supply curve to the left on the graph.

The basic supply and demand graph includes a right-angle vertical and horizontal axis lines. The vertical line represents price and the horizontal line is quantity supplied. In theory, as the price of a product increases, more companies will produce the product because it typically generates profits. Demand will be lower because consumers are usually unwilling to pay high prices for products, unless it has a high perceived benefit by consumers. The opposite will occur if supply decreases on the supply curve. Lower prices will drive higher demand. These changes occur because of a change in amount supplied, which is a significant difference from an overall change in supply.

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While the previous example provides a basic reason for a change in supply, several contributing factors can result in a shift in the supply curve, whether right or left on the supply and demand graph. The availability of substitute consumer goods, number of sellers, cost of economic resources, and consumer expectations can all affect a change in supply. For example, substitute consumer goods allow individuals to purchase goods similar to the number one market product at a lower price. While all the benefits of the number one product may not be present in the substitute good, it offers enough functionality that consumers will find it an acceptable replacement, thus causing a change in supply for both products.

The amount of sellers is a common factor for a change in supply. Companies enter or leave economic markets every day. The resulting change is an increase or decrease in supply that will shift the supply curve to create a new equilibrium in the market. The cost of economics resources represents what companies must pay for necessary business inputs. Resource costs rise or fall based on availability and the effort it takes to gather these items for production.

Consumer expectations can be somewhat difficult to forecast in the economic market. If consumers see one good as less useful than another, this will lead companies to produce less of the item, causing the supply curve to shift to the left. The opposite is true if consumers deem an item more valuable than before, with the change moving the supply curve to the right.

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