The supply curve shows the relationship between the price of a good and the quantity that producers are willing to sell.
It slopes upward because, as the price rises, producers are more willing to supply more units.
Think of a bakery: the higher the price of a cake, the more cakes the baker wants to bake and sell. 🍰
A shift means the entire curve moves left (decrease in supply) or right (increase in supply).
Below are the main factors that can cause such shifts, with everyday analogies to help you remember them.
Analogy: A new oven that bakes cakes faster and cheaper.
Effect: Supply increases → curve shifts right from \$S0\$ to \$S1\$.
Analogy: Flour becomes more expensive.
Effect: Production costs rise → supply decreases → curve shifts left.
Analogy: Bakers expect cake prices to rise next month, so they hold back some cakes.
Effect: Current supply falls → curve shifts left.
Tax: A tax on cake ingredients raises costs → supply decreases.
Subsidy: Government pays for flour → supply increases.
Analogy: More bakeries open in town.
Effect: Aggregate supply rises → curve shifts right.
Analogy: A drought reduces wheat harvest.
Effect: Input scarcity → supply falls → curve shifts left.
| Price ($) | Quantity Supplied before Upgrade (\$S_0\$) | Quantity Supplied after Upgrade (\$S_1\$) |
|---|---|---|
| 5 | 100 | 140 |
| 10 | 200 | 280 |
| 15 | 300 | 420 |
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