Figure 6.3 on the next page. The movement from point Ato point Bis a movement
along the supply curve: the quantity supplied rises along S 1 due to a rise in price. Here,
a rise in price from $1 to $1.50 leads to a rise in the quantity supplied from 10 billion to
11.2 billion pounds of coffee beans. But the quantity supplied can also rise when the
price is unchanged if there is an increase in supply—a rightward shift of the supply
curve. This is shown by the rightward shift of the supply curve from S 1 to S 2. Holding
price constant at $1, the quantity supplied rises from 10 billion pounds at point Aon
S 1 to 12 billion pounds at point Con S 2.
Understanding Shifts of the Supply Curve
Figure 6.4 on the next page illustrates the two basic ways in which supply curves can
shift. When economists talk about an “increase in supply,” they mean a rightwardshift
of the supply curve: at any given price, producers supply a larger quantity of the good
than before. This is shown in Figure 6.4 by the rightward shift of the original supply
curve S 1 to S 2. And when economists talk about a “decrease in supply,” they mean a left-
wardshift of the supply curve: at any given price, producers supply a smaller quantity
of the good than before. This is represented by the leftward shift of S 1 to S 3.
Economists believe that shifts of the supply curve for a good or service are mainly the
result of five factors (though, as in the case of demand, there are other possible causes):
■ Changes in input prices
■ Changes in the prices of related goods or services
■ Changes in technology
■ Changes in expectations
■ Changes in the number of producers
module 6 Supply and Demand: Supply and Equilibrium 61
Section 2 Supply and Demand70 9 11 13 15 17
Quantity of coffee beans
(billions of pounds)$2.001.751.501.251.000.750.50Price of
coffee beans
(per pound)
Price of
coffee beans
(per pound)Supply Schedules for Coffee BeansSupply curve
after entry of
new producersfSupply curve
before entry o
new producersBefore entry After entryQuantity of coffee beans supplied
(billions of pounds)$2.00S 1 S 2
1.75
1.50
1.25
1.00
0.75
0.5011.6
11.5
11.2
10.7
10.0
9.1
8.013.9
13.8
13.4
12.8
12.0
10.9
9.6figure 6.2 An Increase in Supply
The entry of Vietnam into the coffee bean business generated
an increase in supply—a rise in the quantity supplied at any
given price. This event is represented by the two supply
schedules—one showing supply before Vietnam’s entry, theother showing supply after Vietnam came in—and their corre-
sponding supply curves. The increase in supply shifts the sup-
ply curve to the right.