A cost-saving innovation increases the quantity supplied at each price.
This is shown by the rightward shift in the supply curve, from to
a result of a cost-saving innovation, the quantity that is supplied at a price
of $100 per bushel rises from 95 000 to 125 000 bushels per year. A
similar rise occurs at every price.
A change in any of the variables (other than the product’s own price) that affect the quantity
supplied will shift the supply curve to a new position.Let’s now consider six possible causes of shifts in supply curves.
- Prices of Inputs
All things that a firm uses to make its products, such as materials, labour,
and machines, are called the firm’s inputs. Other things being equal, the
higher the price of any input used to make a product, the less profit there
will be from making that product. We expect, therefore, that the higher
the price of any input used by a firm, the less the firm will produce and
offer for sale at any given price of the product. A rise in the price of inputs
reduces profitability and therefore shifts the supply curve for the product
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