Almost every non-price determinant of supply works the same way: it changes what production costs. Once you see that, the list stops being seven things to memorise and becomes one idea with seven doors into it.
📚 What you need to know
Factors that change supply regardless of price are the non-price determinants of supply.
They are: costs of production, indirect taxes, subsidies, technology, the number of firms, weather events, future price expectations, and goods in joint or competitive supply.
A change in any of them shifts the entire curve. Right is an increase in supply; left is a decrease.
Most of them work by changing costs of production, but each needs explaining in its own right before you make that link.
A subsidy shifts the supply curve, not the demand curve. This is the single most common error on this topic.
What a shift looks like
A shift means producers offer a different quantity at every price. The market price can stay exactly where it is and the quantity supplied still changes.
If a key raw material becomes more expensive, supply falls from S to S1: the price is still $8, but only 10 units are now supplied instead of 20.
Careful with the labels on this diagram. A supply curve shifting right is an increase in supply — but because the curve slopes upwards, the new curve also sits below and to the right of the old one. Students who learned “up means more” from other subjects get this backwards. Read the shift horizontally, at a fixed price, every time.
The non-price determinants
Determinant
How it works
Shifts right (increase) when
Shifts left (decrease) when
Costs of production
If raw materials, wages, rent or energy change in price, firms respond by changing how much they supply.
Costs fall
Costs rise
Indirect taxes
A tax on production or sales is an extra cost to the firm, so it acts exactly like a rise in costs.
The tax is cut
The tax is raised
Subsidies
A payment from government to producers lowers the effective cost of production.
The subsidy is introduced or raised
The subsidy is cut or removed
Technology
Better technology raises productivity and lowers unit costs. Ageing or failing technology does the reverse.
New technology is adopted
Technology becomes outdated or breaks down
Number of firms
Firms entering or leaving the industry changes how much the market as a whole can produce.
New firms enter the market
Firms exit the market
Weather events
In agricultural markets, weather is a supply shock that has nothing to do with price or cost decisions.
Growing conditions are unusually good
There is a drought or flooding
Future price expectations
Firms time when they release output, based on where they think prices are heading.
Prices are expected to fall, so firms sell now
Prices are expected to rise, so firms hold stock back
Read the future expectations row carefully, because it runs opposite to the demand version. If prices are expected to rise, buyers rush to buy now, so demand shifts right. But sellers hold their stock back to sell later at the higher price, so supply shifts left. Same expectation, opposite responses — which makes perfect sense once you remember the two sides want opposite things.
Joint and competitive supply
Two goods can be linked on the production side, just as substitutes and complements are linked on the demand side. The two cases pull in opposite directions.
A farmer cannot plant the same hectare with wheat and potatoes. A slaughterhouse cannot produce beef without also producing hides.
Joint supply: two goods come out of the same production process. If higher prices lead farmers to raise beef output, the supply of leather rises with it, whether or not anyone wanted more leather.
Competitive supply: two goods compete for the same resources. A farmer choosing to grow more potatoes on a fixed area of land is choosing to grow less wheat.
The subsidy trap
This one deserves its own section, because it costs marks every year. Suppose a government pays firms a subsidy of $3,000 for each electric vehicle produced. Which curve moves?
The correct chain
subsidy → supply shifts right → price falls → movement along the demand curve → new equilibrium
The subsidy is paid to producers, so it lowers their effective cost of production and shifts supply to the right. The lower price that results then causes an extension in quantity demanded — a movement along the demand curve, not a shift of it. Nothing about consumer income, tastes or related goods has changed, so the demand curve stays exactly where it is.
Say it out loud in the exam: “the subsidy shifts supply right; the resulting fall in price causes an extension in quantity demanded”. That sentence contains three separate marking points and gets the causation the right way round.
Movement or shift?
Identical logic to the demand side. If only the good’s own price changed, you must not draw a second curve.
Worked examples
WORKED EXAMPLE
State the effect on the supply curve for wheat of each event: (a) fertiliser prices rise sharply, (b) the price of wheat rises, (c) a drought hits the growing region, (d) the government introduces a subsidy for wheat farmers. [4]
(a) Fertiliser prices rise
A key input costs more, so costs of production rise.
supply shifts left(b) The price of wheat rises
This is the price of the good itself, so there is no shift.
movement up the curve: an extension in QS(c) Drought
A supply shock reduces the harvest at every price.
supply shifts left(d) Subsidy for farmers
A payment to producers lowers effective costs.
supply shifts righta left, b movement along, c left, d rightOnly (b) is a movement, and (d) is the one most often drawn on the wrong curve.
WORKED EXAMPLE
Using a diagram, explain the effect on the market for solar panels of a government subsidy paid to manufacturers. [4]
Step 1: identify who receives the subsidy
It goes to producers, so it affects the supply side.
effective cost of production fallsStep 2: state the shift
The supply curve shifts right, from S to S2. At every price, manufacturers are willing and able to supply more panels.
Step 3: work through the market
The increase in supply pushes the equilibrium price down.
lower price → extension in quantity demandedStep 4: state the outcome
A new equilibrium forms at a lower price and a higher quantity traded. The demand curve itself has not moved.
Supply shifts right; price falls; quantity demanded extends along D
💡 Exam tip
Explain each determinant in its own right first, then link it to costs of production. Jumping straight to “costs rise” skips a marking point.
Subsidies and indirect taxes both shift supply, in opposite directions. Neither touches the demand curve.
Read shifts horizontally at a fixed price. Right is more supplied, left is less, regardless of how the curve looks.
Future expectations work opposite to demand: expecting a price rise shifts supply left.
Name joint and competitive supply by their proper terms when goods are linked in production.
Label shifts S to S1 or S to S2 and keep the new curve parallel unless told otherwise.
⚠️ Common mix-up
Shifting demand when a subsidy is introduced. Subsidies to producers shift supply. Only the resulting price change touches demand, and only as a movement.
Shifting supply when the good’s own price changes. That is always a movement along.
Thinking an increase in supply moves the curve up. An increase moves it right, which visually places it below and to the right.
Mixing up joint and competitive supply. Joint means produced together; competitive means competing for the same resources.
Giving expectations the demand answer. Buyers rush in when prices are expected to rise; sellers hold back.
Listing “costs of production” for every determinant without explaining the specific mechanism first.
Up next: Finding Market Equilibrium — where the two curves you have just learned finally meet, and the price settles.
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