Explain five determinants of shift in the supply curve.
When price changes, quantity supplied will change. That is a movement along the same supply curve. When factors other than price changes, supply curve will shift. Here are some determinants of the supply curve.
1. Production cost:
Since most private companies’ goal is profit maximization. Higher production cost will lower profit, thus hinder supply. Factors affecting production cost are: input prices, wage rate, government regulation and taxes, etc.
2. Technology:
Technological improvements help reduce production cost and increase profit, thus stimulate higher supply.
3. Number of sellers:
More sellers in the market increase the market supply.
4. Expectation for future prices:
If producers expect future price to be higher, they will try to hold on to their inventories and offer the products to the buyers in the future, thus they can capture the higher price
5 .Goverment Regulations:
Goverment control the supply with their regulation , they maintain the supply chain in the market
When price changes, quantity supplied will change. That is a movement along the same supply curve. When factors other than price changes, supply curve will shift. Here are some determinants of the supply curve.
1. Production cost:
Since most private companies’ goal is profit maximization. Higher production cost will lower profit, thus hinder supply. Factors affecting production cost are: input prices, wage rate, government regulation and taxes, etc.
2. Technology:
Technological improvements help reduce production cost and increase profit, thus stimulate higher supply.
3. Number of sellers:
More sellers in the market increase the market supply.
4. Expectation for future prices:
If producers expect future price to be higher, they will try to hold on to their inventories and offer the products to the buyers in the future, thus they can capture the higher price
5 .Goverment Regulations:
Goverment control the supply with their regulation , they maintain the supply chain in the market
