Summary of the Impact of Changes in Nonprice Determinants of Supply on the Supply Curve
1. Number of Sellers-Direct- Examples (A) A drought destroys the orange crop. Supply of oranges falls. (B) Lower trade barriers on imported textiles. Supply of textiles increases.
2. Technology- Direct- New production methods. Reduce costs. Increases supply.
3. Resource Prices- Inverse- Examples (A) A decline in the price of computer chips increases the
supply of computers. (B) An increase in the cost of farm equipment decreases the supply of soybeans.4. Taxes and Subsidies- Inverse and Direct- Examples (A) An increase in the per pack tax on cigarettes. Reduces supply of cigarettes. (B) Government payments to dairy farmers on the basis of the number of gallons produced. Increase the supply of milk.
5. Expectations- Direct- Examples (A) Oil companies anticipate an increase in the price of oil, and on this expectation causes companies to decrease current supply. (B) Farmers expect the future price of wheat to decline, so they increase the present supply of wheat.
6. Prices of other Goods and Services-Inverse- A decline in the price of tomatoes causes farmers to increase the supply of cucumbers.