Price Elasticity of Supply
Identify the man determinants of the supply of a product. Supply is defined as the amount of a good which producers are both willing and able to sell at a given price. ... Any change in one of the other determinants of supply will cause the supply curve to shift (see below). The upward sloping supply curve can be seen below: The supply curve shows the quantity of a good or service that a firm is willing and able to supply at each given price over a given time period. If there is an increase in supply the supply curve will shift to the right (S2) and if there is a decrease in supply the supply curve will shift to the left (S3). The determinants of supply There are many things that affect supply as well as the price of the good. ... An increase in the price of, say, hops, will increase the costs of a brewing firm and so for any given price the firm will not be able to brew as much beer. Hence, the firm’s supply curve will shift to the left. ... The supply curve drawn above assumes a ‘constant’ state of technology. ... These reduced costs mean that more can be produced at a given price, so the supply curve would shift to the right. ... Granted, we end up paying the tax indirectly when the price of petrol goes up, but the actual tax bill goes to the firm. This again, therefore, represents an increase in the cost to the firm and the supply curve will shift to the left. ... Now the firm can make more units of output at any given price, so the supply curve shifts to the right.