Factors that Shift the Supply Curve (Edexcel IGCSE Economics)

If the price of raw materials or other
costs of production change, firms respond by changing supply

COP increases

S decreases, shifting left
(S → S₁)

COP
decreases

S increases, shifting right
(S → S₂)

New technology increases productivity and lowers production costs. Ageing technology can have the opposite effect

Technology increases

S increases, shifting right
(S → S₂)

Technology decreases

S decreases, shifting left
(S → S₁)

Any changes to indirect taxes change the cost of production for a firm and impact supply

Taxes increase

S decreases, shifting left
(S → S₁)

Taxes decrease

S increases, shifting right
(S → S₂)

Changes to producer subsidies directly impact the cost of production for the firm

Subsidy increases

S increases, shifting right
(S → S₂)

Subsidy decreases

S decreases, shifting left
(S → S₁)

The entry and exit of firms into the market has a direct impact on supply. If ten new firms start selling building materials in Hanoi, the supply of building material will increase

No. of firms increases

S increases, shifting right
(S → S₂)

No. of firms decreases

S decreases, shifting left
(S → S₁)

Droughts or flooding can cause a supply shock in agricultural markets. A drought will cause supply to decrease. Unexpectedly good growing conditions can cause supply to increase.

Drought occurs

S decreases, shifting left
(S → S₁)

Good weather

S increases, shifting right
(S → S₂)