Offer shifts

The offer shifts can be to the right or to the left. A shift in the supply curve to the right is due to an increase in supply, while a decrease in supply shifts the curve to the left.

Offer shifts

Shifts in the supply curve to the right or to the left are explained by variations in a factor other than the price of the good or service itself.

Supply offsets on a chart

As can be seen in the graph, an increase in supply causes a movement of the original supply curve O 0 to position O 1 . Similarly, a reduction in supply causes a movement of the supply curve from O 0 to position O 2.

Displacement Offer

It must be borne in mind that, when the movements of the supply curve occur on the same curve, they are due to variations in price. Therefore, changes in the price of a good or service explain movements along the supply curve.

Changes in the quantities supplied refer to shifts within the same supply curve. Whereas changes in supply shift the entire supply curve, either to the left or to the right.

Shifts in the supply curve are due to a number of factors. Economic science has managed to identify and study these fundamental elements or factors that cause such displacements.

When economists perform these price analyzes, they use the assumption ceteris paribus, which means "everything else remains constant." The shifts in the supply curve reflect a change in any of the factors influencing the supply of consumers and that consequently is different from the price.

Shift of the supply curve to the right

An increase in supply occurs when this curve shifts to the right. This increase may be due to the following factors:

  • Decrease in the cost of production factors. When production costs fall, it makes the production of goods cheaper and more profitable. This allows an incentive for producers to offer larger quantities of goods.
  • An increase in the number of producers. Naturally, when more producers enter the market, the greater the supply.
  • Expectations of change. The situation arises that when entrepreneurs estimate that the market trend for a certain product is downward, they try to sell more in the shortest time possible. This results in an increase in supply today.
  • Technological advance. When technological advances occur, the company can produce more and with greater profitability. This being an incentive to offer larger quantities.
  • State subsidies. When the State deems it convenient to subsidize certain products of necessity, it grants the companies certain privileges and payments for units produced. This allows the entrepreneur greater profitability and incentive to offer a greater quantity.

Example of shift to the right in the supply curve

Of the factors mentioned above we are going to take one as an example, to graphically see its displacement. Let’s say a decrease in the cost of brewing has occurred. The higher profitability in its production has given incentive to producers to increase their offer.

An increase in beer production shifts the supply curve to the right. The graph below shows this variation.

Offer Right Scroll

Notice that an increase in the supply of beer shifts the supply curve from O 1 to O2 . We have that at the initial price of 3 euros the quantity demanded is 2 million liters of beers. An increase in supply shifts the supply curve to 0 1. a quantity supplied of 3 million liters.

Shift of the supply curve to the left

A decrease in supply occurs when said curve shifts downwards, that is, to the left. This decrease may be due to the following factors:

  • Increase in the cost of production factors. When production costs rise, profitability for the company becomes lower. This constitutes a disincentive for producers to offer larger quantities of goods.
  • Decrease in the number of producers. Naturally, the smaller the number of producers, the smaller the supply.
  • Expectations of change. The situation occurs that when entrepreneurs estimate that the market trend for a certain product is upward. Businesses are likely to prepare larger quantities of goods to offer.
  • Taxes. When the State creates taxes by charging producers with it, it will result in the increase in the cost of what is produced. So companies will be willing to offer less quantity

Example of shift to the left in the supply curve

Of the factors mentioned above we are going to take one as an example, to graphically see its displacement. Let’s say there has been an increase in the cost of brewing. The lower profitability in its production has generated a disincentive among producers, resulting in a decrease in the supply of beer.

A decrease in beer production shifts the supply curve to the left. The graph below shows this variation.

Offer Left Scroll

Note that a decrease in the supply of beer shifts the supply curve from O 2 to O 1. We have that at the initial price of 3 euros the quantity demanded is 3 million liters of beer. An increase in supply shifts the supply curve to 0 1. a quantity supplied of 2 million liters.