2.2.5—Non-price determinants of supply

Input prices, technology, taxes, subsidies, expectations, number of firms and natural conditions can change supply at every price.

Lower input costs or better technology usually shift supply right; a tax or disruption shifts it left, depending on incidence and capacity.

Name the determinant, direction and cost/incentive mechanism before predicting the shift.

A subsidy lowers effective production cost and may increase supply; a flood may reduce it despite unchanged product price.

A product’s own price is not a non-price determinant.

Prices of related goods can shift supply through competitive or joint production. If farmland can produce wheat or maize, a higher maize price may reduce wheat supply (competitive supply); if beef and leather are produced together, more beef production can increase leather supply (joint supply). Expected higher future prices may reduce current supply, while entry of firms shifts market supply right and exit shifts it left.