A supply curve is a graphical representation of the relationship between the price of a product and the quantity of such product that a producer or its sellers is willing and able to supply at a given price point. There is a direct relationship between price and quantity supplied. An increase in the price of a particular product would result in an increase in the quantity supplied for such product assuming that everything else remains the same.
However, aside from price, there are other factors affecting supply. These are called non-price determinants of supply. They are also examples of supply shifters. Each can change the quantity of supply even if the price remains the same. Nevertheless, based on this, supply shifters are factors or variables that cause leftward or rightward shifts in the supply curve, thus changing the quantity of goods or services that can be supplied
Examples of Supply Shifters: The Factors Affecting the Quantity of Supply
1. Costs of Production
The costs involved in the production or the price of inputs or the cost of the factors of production represent one of prime examples of supply shifters. Specific examples of these production inputs are raw materials, labor, and energy. The costs of each affect the capabilities of a producer to produce goods or provide services. An increase in production costs may cause the supply curve to shift left because it can reduce production output or increase end-user prices.
2. Expectations of the Seller
Supply curves are also based partly on the expectations of producers or sellers about future market conditions. These conditions are affected by market trends, changing consumer preferences, the arrival of alternatives and substitutes, and regulations, among others. A producer would increase its production output if it believes that the demand for a particular product will increase in the foreseeable future. This will increase the supply in the market.
3. Technology and Innovation
Technological breakthroughs can improve production effectiveness and efficiency in terms of time and cost. This can cause the supply curve for a particular product to shift right. However, in several circumstances, as a factor that can affect production capabilities, technology, or more appropriately, technological problems or technical issues can affect production costs. These problems or issues can also affect end-user prices and the quantity of outputs
4. Alternative Production
Another example of supply shifters is the opportunity from an alternative product. Note that producing one product could mean foregoing the production of another. If Product A seems more profitable and Product B is less attractive due to factors such as demand and cost, it is logical for a producer to pursue the former and forego the latter. This will result in a rightward shift in the supply curve for Product A and a leftward shift in the supply curve for Product B.
5. Number of Sellers
Market competition as determined by the number of sellers also affects the quantity of available supply in the market. A change in the number of sellers changes the quantity of supply. More sellers mean more supplies, thus causing a rightward shift to the supply curve. Fewer sellers would reduce supplies, thereby causing a leftward shift to the supply curve. There are cases in which market saturation can have a negative impact on an overall product category.
6. Government Intervention:
Policies, such as supply-side economic or demand-side economic policy, and regulations can affect supply in several ways. A prime example is the imposition of higher taxes on certain industries and sectors or goods and services. This increases production costs and end-user prices. The government can also regulate the production and movement of certain goods or services through incentives or embargoes and negatively or positively affect supply.
7. Calamities and Manmade Events
Natural calamities and manmade events are also examples of supply shifters. Severe weather and insect infestations can reduce the supply of agricultural products. Civil unrest or military conflict can affect the operations of businesses and the overall viability of the economy, thus resulting in fewer production outputs. Economic sanctions or trade restrictions made by a government can affect business operations and overall economic activities in sanctioned states.
Pointer on Demand Shifters: A Note on the Examples of Demand Shifters
There is an equivalent to supply shifters in the realm of demand. These are called demand shifters. They are non-price determinants of demands and they represent factors or variables that specifically cause leftward or rightward shifts in the demand curve and cause the demand to change even if the price remains the same. Examples of such shifters are the income of consumers, the tastes or preferences of the consumers, the price of complements or substitutes, the size of the market, and expectations about the future.
