Movements in the Supply Curve [Virtual Learning Arcade]

An explanation of the determinants of the supply curve and the factors that will shift the supply curve and those that will cause movements in it as part of the interrelationship between markets simulation in the Virtual Learning Arcade.

Spotlight on the theory

Supply Curve, Movements

The supply curve is upward sloping.

There are TWO types of change in supply;

1. Movement ALONG the supply curve
2. SHIFTS in the supply curve

A movement ALONG the supply curve

A movement along the supply curve is caused by a change in PRICE of the good or service. For instance, an increase in the price of the good results in an EXTENSION of supply (quantity supplied will increase), whilst a decrease in price causes a CONTRACTION of supply (quantity supplied will decrease).

A SHIFT in the supply curve

A shift in the supply curve is caused by a change in any non-price determinant of supply. The curve can shift to the right or left.

A rightward shift represents an increase in the quantity supplied (at all prices) S1 to S2, whilst a leftward shift represents a decrease in the quantity supplied (at all prices). S1 to S3.

movements in supply curve

The movements can be caused by the following;

1. Change in costs of production - if the costs of production increase then the potential profit will fall. This will cause producers to look at alternative goods to produce. Therefore, an increase in the costs of production will cause a leftward shift in the supply curve.
2. Role of technology - if the degree of technology employed in production increases then firms will be able to make more goods with their given level of inputs (factors of production). Therefore, an improvement in technology causes the supply curve to shift to the right.

How will the supply curve for a normal good shift when the price of labour increases? (Select one answer)

(a) * supply curve shifts to the left
(b) * supply curve shifts to the right
(b) * supply curve does not shift




How will the supply curve for a normal good shift when the price of the good increases? (Select one answer)

(a) * supply curve shifts to the left
(b) * supply curve shifts to the right
(b) * supply curve does not shift