Question

(TCO A) What is the cause of a shift in a good's supply curve?

Answer 1

The supply curve shows the relationship between the good or service supplied and the price. An increase in the quantity of the good or service supplied causes the supply curve to shift to the right and a decrease in the quantity of the good or service supplied causes the supply curve to shift to the left.

The shift in the supply curve is caused by a number of factors such as:

1.Labor productivity: An increase in the labor productivity will cause an increase in increase in the quantity supplied which shifts the supply curve to the right.

2.Input prices: A decrease in the production inputs will reduce production costs and thereby, increasing the production of the good. This shifts the supply curve to the right.

3.Expectation: When producers expect the price of their good or service to increase in the future, they increase production of the same shifting the supply curve.

4.Taxes and subsidies: If there is a decrease in business tax or an increase in subsidies for a product, supply will increase due to decrease in production cost.