Prepared by: Mr. NAFIS ALAM capital and land is rented or purchased.

When there is a change in the

price/rent/wage of these factors, producer’s cost of production also changes.
CASUES OF SHIFT IN SUPPLY// If the price of one (or more) of input rises/falls, then total cost of production
NON-PRICE FACTORS OF SUPPLY // also rises/falls.
CONDITIONS OF SUPPLY Example: To produce a book, the main input (or ingredient) needed is paper. If
the cost of paper rises then cost of producing books also increases.
Producers supply more when costs of production falls. Changes in supply, This reduces the book producer’s profit. As a result he lowers his production.
therefore, has to do mainly with changes in costs of production. Thus Supply Curve of books shift to the left.
In short, whenever : In order to keep the cost of production same as before, firms will produce
 there is a FALL in cost of production, SUPPLY curve shifts to the RIGHT. fewer units and ,therefore, supply fewer books at any given price.
 there is a RISE in cost of production, SUPPLY curve shits to the LEFT.
2. TECHNOLOGY :
The change in the former casues a change in the later.
Now a question naturally arises in our mind; why does cost of production The introduction of new technology reduces cost of production.
change? The main reason for change in cost of production are: When a firm uses new technology, it can produce at a lower cost. Therefore,
1. PRICE OF INPUTS/FACTORS they supply more output at any given price. The supply curve shits to the
2. TECHNOLOGY right.
3. SUBSIDY For example, nowadays garment factories are using advanced technology. As
4. TAX a result, they can produce more clothes in a shorter time with the same cost.
The first four points discuss how the cost of production may change. However, Example: the use of combined harvester in agriculture has greatly reduced
SUPPLY may shift due to other factors too. These are: cost of production. Farmers are able to supply higher quantities at any given
5. WEATHER CONDITIONS price. Supply has shifted to the right.
6. DISCOVERY OF NEW RESERVES
N:B:Cost of production should not be confused with FINAL PRICE.
7. JOINT SUPPLY
N:B: Look up the terms: RENEWABLE RESOURCES and NON-RENEWABLE
8. DESTRUCTION A
The above four points discuss other reasons for which may SUPPLY curve may RESOURCES
shift. Thus, in total there are eight factors that cause the SUPPLY curve to
shift: 3. SUBSIDIES (from government):
A subsidiy is a payment from the government to the producer. It reduces
1. PRICE OF INPUTS (COST OF PRODUCTION): the cost of production. As a result, the producer is able to supply more at the
Cost of production is the combined/sum total cost of all inputs used in same price. Therefore, supply curve shits to the LEFT.
production. A subsidy does not actually reduce the cost of production. Rather, a part of
Production of any good/service requires several inputs. Cost of production is the production cost is paid by the government, thereby having the same
the sum total/combined payment for all these inputs. effect.
The cost of all the items is together called cost of production. Producer buys
each of these items at a price. Labor has to be paid wages and machinery,
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Subsidy is not given to all producers. Subsidy is given to those producers who
produce goods that are benefical to the economy/society and are needed in
large quantity.
Example: In Bangladesh, the railway sector receives a subsidy from the
government.
 A subsidy pushes the SUPPLY curve to the RIGHT.
 A subsidy has the same effect as a fall in the cost of production.
 Producer will supply more units at any given price.
4. TAX (from government):
Governments often impose tax on some products. When this happens,
producers’ cost of production goes up. There is the usual cost of production
plus the additional burden of tax. In total, producer incurs higher cost for
every unit produced. Therefore she reduces her supply at any given level of
price.
 A tax (indirect tax) pushes the SUPPLY curve to the LEFT.
 Imposition of tax has the same effect as a rise in cost of production.
 Producers will supply fewer units at any given price.
The above four factors directly affect the costs of production. Thereby they
cause a shift in supply. But other issues/factors may also affect supply. These
are:
5. WEATHER CONDITONS: ( and other natural factors)
Natural factors refer to issues/events that are beyond the control of
humans.
Changes in weather conditions is the most common natural factor. It affects
crops and other agricultural products. If weather is favorable, there is good
harvest and supply increases. In contrast, if weather is adverse, then crops are
destroyed and supply decreases. This is why the supply of crops, fruits and
fishes vary a great deal every year.
Many crops require a particular level of rainfall for growth. If rain fall is above
that level (or below that level) then the crop does not grow properly.
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In contrast, tea gardens/plantations are highly dependent on rainfall. If there
is not enough rainfall in a particular year, then tea plants will not grow
properly in that year. Draught can kill many plants.
Many fruits need sunlight for growth. But if there is not enough sunlight in a
year, then those fruits do not grow properly. So, rainfall, sunshine,
temperature, humidity, and other weather conditions play a major role in the
supply of agricultural goods.
EXAMPLES:
All over the world, global warming is having an impact on production of crops.
A change in the supply of these will also indirectly affect the supply of
products that depend on them. Example: ice cream needs vanilla, butter
needs milk.
In addition to weather, there are many other natural factors also influence
Supply.E.G:
 If there is a rise in the population of rats/mice in the crop field, then crop
supply shifts to the left.
 Due to water and river pollution, fishes (and other water-borne creatures)
are dying rapidly. Some fish species are already shrinking in number. Supply
Curve of fish would shift to the left.
 Example: Over the last few years, Hilsha fish is becoming more and more
rare. And thus, their supply is falling.
6. DISCOVERY OF NEW RESERVERVES OF RESOURCE:
Many resources are found in nature. They cannot be artificially made.
Gold, copper, iron and coal are some examples.. Therefore, human beings are
completely dependent on nature for the availability of these goods. The
supply of these resources are beyond human control and are limited
But, when people discover a new reserve of these resources, they are able to
supply them in greater quanities. For example, if a new gold mine is
discovered, there will be a rise in global supply of gold.
Large reserves of these materials are often discovered. When this happens
there is an increase in their availability. This increases Supply and shifts the
Supply Curve to the right.
On the other hand, if no reserves are discovered, the stock of these goods are
depleted over time. For example, humans are using petrol, diesel and octane
in large quantities. One day, we will run out of these oils and Supply will shift
to the left.

Remember, not all natural resources are limited in supply. Wood is also a
natural resource as it comes from trees. But human beings can control the
supply of woods. They can plant more trees and supply more wood. But,
unfortunately, humans cannot grow more coal, gold, oil or diamond.

Natural resources that can be renewed in some way are RENEWALBE

NATURAL RESOURCES. Ex-solar enery

Natural resources that can be renewed in any way are NON-RENEWABLE

RESOURCES.

7. JOINT SUPPLY
When cows a is slaughtered, it creates s supply of beef. But at the same
time, it also creates a supply of leather. Therefore, if for some reason there is
a rise in the slaughter of cows in a year, there will also be an increase in the
supply of leather. Leather is an automatic by-product of beef.

 one product is a by-product of the production process of another.

 Production of one automatically creates supply of the other.
 If for any reason, production of the first rises, then the supply of the
other will also rise.
 Ex:-Slaughtering cows increase supply of beef, as well as leather.
If there is a rise in the number of cows slaughtered in a year, then the supply
of leather would also increase that year.

8. Destruction of resources, capital, stocks:

Natural disasters, as well as man-made disasters, may destroy stocks,
capital, farmland and factories. When this happens, supply of goods may
fall.

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