[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

a greater quantity. That is why the quantity supplied along the curve S 1 is greater than
the quantity supplied, at the same price, along the curve S 0 .
Another source of shifts is changes in technology. The technological improvements
in the computer industry over the past two decades have led to a rightward
shift in the market supply curve. Yet another source of shifts is nature. The supply
curve for agricultural goods may shift to the right or left depending on weather
conditions, insect infestations, or animal diseases.
Firms often borrow to obtain inputs needed for production, and a rise in interest
rates will increase the cost of borrowing. This increase too will induce a leftward
shift in the supply curve. Finally, changed expectations can also lead to a
shift in the supply curve. If firms believe that a new technology for making cars will
become available in two years, they will discourage investment today, leading to a
temporary leftward shift in the supply curve.
Wrap-Up
SOURCES OF SHIFTS IN MARKET
SUPPLY CURVES
A change in the prices of inputs
A change in technology
A
B
PRICE OF CANDY BARS (p)
p 1
Supply
curve
PRICE OF CANDY BARS (p)
Original
supply
curve
p 0
Q 0 Q 1
p 0
Q 0 Q 1
New
supply
curve
QUANTITY OF CANDY BARS (Q )
QUANTITY OF CANDY BARS (Q )
Figure 3.12
MOVEMENT ALONG THE
SUPPLY CURVE VERSUS SHIFT IN
THE SUPPLY CURVE
Panel A shows an increase in quantity supplied caused by a higher price—a movement
along a given supply curve. Panel B illustrates an increase in quantity supplied caused by
a shift in the entire supply curve, so that a greater quantity is supplied at every market
price.
66 ∂ CHAPTER 3 DEMAND, SUPPLY, AND PRICE