6 factors that may shift the supply curve

Main factors that affect supply

• p : production costs

  • Such as wages, raw material, energy, rent and machinery.

  • If production of cost rise, sellers are likely to reduce supply. This is because their profits will be reduced. Supply curve will shift to the left.

  • If costs fall, quantity supplied will increase because production became more profitable so supply curve will shift to the right.

  • Shortage in some factors of production can cause the producers have difficulty in supplying the market.

• I : indirect taxes

  • When taxes on spending are increased, the supply curve will shift to the left and quantity supplied will fall

  • If indirect races are reduced, quantity supplied will shift to the right because costs are lowered and quantity supplied will rise

  • Government use indirect taxes to discourage the consumption of harmful products such as alcohol and cigarettes

• N : natural factors

  • Weather, natural disasters or the presence of pests or diseases

  • Good conditions can increase supply ( shift to the right)

  • Poor conditions can decrease supply (shift to the left)

• S : subsidies

  • Government may give money to business to encourage them to produce a particular product

  • The effect is to increase its supply

• N : new technology

  • It is more efficient which can reduce the costs of production

  • New technology can lower the costs

Indirect taxes

Taxes levied on spending, such as VAT

Productivity

Rate at which goods are produced, and the amount produced in relation to the work, time and money needed to produce them.

Consumption

Amount of goods, services, energy or natural materials used in a particular period of time

Subsidy

Money that is paid by a government or organization to make prices lower, reduce the cost of producing goods or providing a service, usually to encourage production of a certain good