Costs of production

↑ Production cost → (↓ profit) → ↓ supply

Changes in technology

New technology → (↓ production costs) ↑ supply

Indirect taxes

• exposed by government on spending

↑ Indirect taxes → (↑ costs) → ↓ Supply

↓ Indirect taxes → (↓ costs) → ↑ Supply

• Example

  • VAT: percentage is added to the price of a good when sold

    Original price	Tax (1%)	Total price	Cost	Profit
    $15	$0.15	$15.15	$10	$5

    → non-parallel left shift

  • Excise duty: unit tax

    • add a lump sum to the price of goods (eg. Cigarettes)

    Original price	Excise duty	Total price	Cost	Profit
    $8	$2	$10	$5	$3

    → parallel left shift

Subsidies

• Government give money to businesses in the form of grant
  • encourage them to produce particular products

↑ Subsidies → (↓ production costs) → ↑ supply curve

Natural factors

• Weather/ Natural disasters/ Infestation, especially agricultural products

Good growing conditions → (↑ crop yields) → ↑ supply

The prices of other goods

• Switch production

• Competitive supply:

  ↑ Price of carrots → ↑ Supply of carrots → Supply of tomatoes

• Join product:

  ↑ Price of beef → ↑ Supply of beef → ↑ Supply of leather

Number of sellers