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Economics · Ch 4 — Supply

Movement Along vs. Shift of the Supply Curve

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Movement Along vs. Shift of the Supply Curve

It is important to keep two distinct kinds of change on the supply curve separate.

Change in quantity supplied (movement along the curve). When the commodity's own price changes, other determinants remaining constant, the seller simply moves to a different point on the SAME supply curve — an expansion of supply (movement up-and-right, more supplied at a higher price) or a contraction of supply (movement down-and-left, less supplied at a lower price).

Change in supply (shift of the whole curve). When any determinant OTHER than the commodity's own price changes — a fall in the cost of inputs, an improvement in technology, a subsidy, a favourable change in the price of a related good, more firms entering the industry, or a change in price expectations — the entire supply curve shifts. A rightward shift (increase in supply) means more is offered at every price than before; a leftward shift (decrease in supply) means less is offered at every price than …