Wednesday, April 10, 2013

Shift of Supply versus Movement Along a Supply Curve

Movement along a supply curve  The change in quantity supplied brought about by a change in price.

Shift of a supply curve    The change that takes place in a supply curve corresponding to a new relationship between quantity supplied of a good and the price of that good. The shift is brought about by a
change in the original conditions.

Table 3.4 and Figure 3.7 describe this change. At $3 a bushel, farmers would have produced 30,000 bushels from the old seed (schedule in Table 3.4); with the lower cost of production and higher yield resulting from the new seed, they produce 40,000 bushels (schedule in Table 3.4). At $1.75 per bushel, they would have produced 10,000 bushels from the old seed; but with the lower costs and higher yields, output rises
to 23,000 bushels.

Increases in input prices may also cause supply curves to shift. If Farmer Brown faces higher fuel costs, for example, his supply curve will shift to the left—that is, he will produce less at any S1

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