Seven things move the supply curve, and almost all of them work through one channel: the cost of producing. Get that idea straight and you do not have to memorise seven separate stories — you just have to ask whether producing has become cheaper or dearer.
📚 What you need to know
A non-price determinant of supply changes how much firms sell at every price level.
Shift right = supply increases (S → S₁). Shift left = supply decreases (S → S₂).
The seven: costs of production, indirect taxes, subsidies, technology, number of firms, weather and shocks, future price expectations, plus joint and competitive supply.
An indirect tax acts like a cost: it shifts supply left. A subsidy does the opposite.
A subsidy shifts supply, never demand. The lower price then causes a movement along the demand curve.
What a supply shift looks like
An increase in supply is a shift to the right, even though the curve also sits lower on the page. Describe the direction horizontally to stay out of trouble.
The determinants, and why they all look the same
Determinant
What happens
Which way the curve moves
Costs of production
Wages, raw materials, rent, energy or transport get dearer or cheaper
Costs up → left. Costs down → right
Indirect taxes
A tax per unit adds to the cost of supplying each unit
Tax up → left. Tax cut → right
Subsidies
A government payment per unit lowers the effective cost of supplying
Subsidy up → right. Subsidy removed → left
Technology
Better machines and methods raise productivity and cut unit costs
Better tech → right. Ageing tech → left
Number of firms
Firms entering or leaving the industry changes total capacity
Entry → right. Exit → left
Weather and shocks
Drought, flood or disease hits output in agriculture especially hard
Bad shock → left. Good conditions → right
Future price expectations
Expecting a higher price later, firms hold stock back to sell then
Expect a rise → left now. Expect a fall → right now
Read down the middle column and you will see the same sentence six times: something changed the cost or the capacity of producing. That is the thread to hang your answer on — but still name the specific determinant first, then link it to cost. Naming it is usually a separate mark.
Taxes and subsidies
These two come up constantly, because they are the government’s main tools for pushing a market around. Both work through cost.
The vertical gap between the two curves is the size of the tax or subsidy per unit. That gap is what you measure in calculation questions later in the course.
The classic error. A subsidy for electric cars does not shift the demand curve right. It shifts supply right; the price then falls, and consumers respond with a movement along their demand curve. Getting this the wrong way round costs marks every year.
Joint supply and competitive supply
Some goods are produced together whether you like it or not. Others compete for the same land, machines or workers.
Joint supply is why a bad year for cattle also pushes up leather prices. Competitive supply is why a good year for one crop can quietly shrink the harvest of another.
Worked examples
WORKED EXAMPLE 1
State the effect on the supply of bread of each: (a) the wheat price doubles; (b) a new oven halves baking time; (c) three bakeries in the town close; (d) the price of bread itself rises. [4]
Ask: did the cost or capacity of producing change, or just the price?
(a) Input cost rises → supply shifts left
(b) Technology raises productivity, unit costs fall → supply shifts right
(c) Fewer firms, less capacity → supply shifts left
(d) The good’s own price → movement along, extension in QSleft, right, left, movement along(d) is the check question in almost every one of these lists. Never shift for the good’s own price.
WORKED EXAMPLE 2
A government introduces a $0.40 per litre subsidy for producers of oat milk. Using a diagram, explain the effect on the supply of oat milk. [4]
Step 1: what a subsidy does
It is a payment per unit, so the effective cost of supplying each litre falls by $0.40.
Step 2: the shift
At every price, firms are willing to supply more: supply shifts right, S to S₁.
Step 3: the diagram
Two upward-sloping curves, the new one to the right and $0.40 vertically below the old one, with an arrow.
Step 4: what happens next
The market price falls, causing an extension in quantity demanded — a movement along the demand curve, not a shift.
Supply shifts right; demand does not moveThe vertical gap between the curves equals the subsidy per unit. Label it.
WORKED EXAMPLE 3
Wool and lamb come from the same animal. A disease outbreak sharply reduces sheep numbers. Explain the effect on the supply of wool. [3]
Step 1: name the relationship
Wool and lamb are in joint supply — producing one produces the other.
Step 2: trace the shock
Fewer sheep means less lamb and automatically less wool, whatever the wool price is.
Step 3: state the shift
Supply of wool shifts left, so the wool price rises.
Joint supply: a shock to one good hits the other tooNote the wool price rose without anything happening in the wool market itself. That is a nice evaluation point about interdependence.
💡 Exam tip
Name the determinant, then link it to cost. Two steps, often two marks.
Draw both curves, label them S and S₁, and add the shift arrow.
Remember subsidies shift supply, never demand.
Say left and right, not up and down. An increase in supply is a shift right.
Weather shocks matter most in agriculture. Use a farming example and you will sound like you know the market.
For joint supply questions, remember the shock does not have to start in the market you are asked about.
⚠ Common mix-up
Shifting demand for a producer subsidy. It is a supply-side policy.
Shifting supply when the good’s own price changes. That is a movement along.
Calling an increase in supply a shift “down”. It is a shift right, even though it looks lower on the page.
Mixing up joint and competitive supply. Joint = made together. Competitive = fighting for the same resources.
Forgetting that expectations work backwards for supply. Expecting higher prices makes firms hold stock back, shifting supply left today — the opposite of what happens to demand.
Saying an indirect tax raises the price directly. It shifts supply left; the price rise is the market’s response.
Up next: Reaching and Losing Market Equilibrium — put the two curves on one diagram and watch the market sort itself out.
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