With real-world examples, explain the various factors that can cause a shift in the supply curve of a commodity

Question

What will be an ideal response?

Answer 1

The supply curve of a commodity can shift for the following reasons.
a) The price of inputs used to produce the good: The price of inputs plays an important role in a producer's decision of how much of a good to supply. For example, a fall in the price of plastic is likely to increase the supply of plastic cups, at every price level.
b) The technology used to produce the good: Technology plays an important role in determining supply. If a new innovation increases labor productivity, it is likely that firms will start supplying more. For example, a new method of manufacturing cars can increase the number of cars supplied to the market at every price level.
c) The number and scale of sellers: The number and scale of sellers also determines the market supply. For example, if new firms enter the market for cigarettes, the supply of cigarettes will increase at every price level.
d) Expectations about the future: Expectations about the future greatly influence producers' decisions. For example, if producers of winter coats expect the next winter to be colder than normal, they will increase the production of winter coats.