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

A change in the natural environment
A change in the availability of credit
A change in expectations
SHIFTS IN A SUPPLY CURVE VERSUS
MOVEMENTS ALONG A SUPPLY CURVE
Distinguishing between a movement along a curve and a shift in the curve itself is just
as important for supply curves as it is for demand curves. In Figure 3.12A, the price
of candy bars has gone up, with a corresponding increase in quantity supplied. Thus,
there has been a movement along the supply curve.
By contrast, in Figure 3.12B, the supply curve has shifted to the right, perhaps
because a new production technique has made it cheaper to produce candy bars.
Now, even though the price does not change, the quantity supplied increases. The
quantity supplied in the market can increase either because the price of the good
has increased, so that for a given supply curve, the quantity produced is higher; or
because the supply curve has shifted, so that at a given price, the quantity supplied
has increased.
FUNDAMENTALS OF DEMAND, SUPPLY, AND PRICE 2
SUPPLY INCREASES AS PRICE RISES
As the price of a good increases, the quantity firms are willing to supply rises.
Changes in factors other than price—such as the costs of production or changes in
technology—shift the supply curve.
Law of Supply and Demand
This chapter began with the assertion that supply and demand work together to
determine the market price in competitive markets. Figure 3.13 puts a market supply
curve and a market demand curve on the same graph to show how this happens.
The price actually paid and received in the market will be determined by the intersection
of the two curves. This point is labeled E 0 , for equilibrium, and the corresponding
price ($0.75) and quantity (20 million) are called, respectively, the
equilibrium price and the equilibrium quantity.
Since the term equilibrium will recur throughout the book, it is important to
understand the concept clearly. Equilibrium describes a situation where there are
no forces (reasons) for change. No one has an incentive to change the result—the
price or quantity consumed or produced, in the case of supply and demand.
Physicists also speak of equilibrium in describing a weight hanging from a spring.
Two forces are working on the weight. Gravity is pulling it down; the spring is pulling
LAW OF SUPPLY AND DEMAND ∂ 67