Non-Price Determinants of Supply

1 The prices of inputs used to produce the product (lower prices, curve shifts right)
2 Technology (improvements shift curve right)
3 Taxes and subsidies (taxes behave as a cost, shift left, subsidies reduce costs,
shift right)
4 Price Expectations (e.g., farmers withhold crops in expectation of higher prices)
5 Number of Firms (more firms shift to the right)

Price elasticity of demand

-A measure of the extent to which the quantity demanded of a good changes when
the price of the good changes
-To determine the price elasticity of demand, we compare the percentage change in
the quantity demanded with the percentage change in price.
-Percent change in price = ((New price Initial price)/Initial Price) x 100

Price elasticity of supply

-is a measure used in economics to show the responsiveness, or elasticity, of the
quantity supplied of a good or service to a change in its price.
-price elasticity of supply = percentage change in quantity supplied/ percentage
change in price

Substitution Effect
The substitution effect is the economic understanding that as prices rise or
income decreases consumers will replace more expensive items with less costly
alternatives.

Income Effect
The income effect represents the change in an individual's or economy's income
and shows how that change impacts the quantity demanded of a good or service.