Movement Along vs. Shift of the Supply Curve

Exactly as with demand, a change in quantity supplied can come about in two structurally different ways, and Maharashtra Board Std XII Economics exams routinely test whether a student can tell them apart.

Movement along the supply curve happens ONLY when the commodity's OWN price changes, every other determinant remaining constant — this is a movement along the SAME, unchanged supply curve.

• Extension of supply — a rise in quantity supplied caused by a RISE in the commodity's own price; shown as an upward-and-rightward movement along the same curve.
• Contraction of supply — a fall in quantity supplied caused by a FALL in the commodity's own price; shown as a downward-and-leftward movement along the same curve.

Shift of the supply curve happens when ANY determinant OTHER than the commodity's own price changes (cost of production, technology, government tax/subsidy, price of related goods, sellers' expectations, number of sellers) — the ENTIRE curve moves to a new position, so a different quantity is supplied at EVERY price, not just at one.

• Increase in supply — the ENTIRE supply curve shifts to the RIGHT (e.g., due to a fall in cost of production or an improvement in technology), meaning more is supplied at every given price.
• Decrease in supply — the entire supply curve shifts to the LEFT (e.g., due to a rise in cost of production or a fresh tax), meaning less is supplied at every given price. …