Various factors such as modern technology, production cost, number of sellers, market price of complementary products, government policy etc. cause shift in supply curve. In this post we are going to discuss some of these major factors that causes supply curve shift either to right or to left.
The major factors that cause shift in supply curve can be described as follows:
1. Production Technology
Improved production technology helps to increase productivity and minimize the cost of production. As a result, producers can supply more quantity of product. So, increased supply causes the supply curve shift to the right. If technology is not improved and supply falls, then supply curve shifts to the left.
4. Price Of Related Goods
2. Number Of Suppliers
Shift in supply curve depends on the number of suppliers or sellers also. More sellers means more supply of goods which shifts supply curve to the right direction. In case of limited number of suppliers or sellers, curve shifts in the left direction.
3. Cost Of Production
It is another major factor causing shift in supply curve. If the cost of production is very high then producers may curtail production which leads to decrease in supply. In this situation supply curve shifts to the left. If cost of production is decreased then producers produce more units of products and supply will increase. Thus causes the supply curve shift to the right.
A change in the price of substitutes or complementary goods also affects the demand of existing product. Change in demand influences the supply which causes the shift in the supply curve.
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5. Government Policy
Supply is influenced by the protection policy and free economy policy of the government. It also causes the change in supply curve.
6. Transportation And Communication
Transportation and communication system helps to increase the supply of the products which causes the change in supply curve.
