AP_Krugman_Textbook

62 section 2 Supply and Demand

figure 6.4

Shifts of the Supply Curve

Any event that increases supply shifts the

supply curve to the right, reflecting a rise

in the quantity supplied at any given

price. Any event that decreases supply

shifts the supply curve to the left, reflect-

ing a fall in the quantity supplied at any

given price.

Price

Quantity

S 3 S 1 S 2

Decrease

in supply

Increase

in supply

figure 6.3

Movement Along the

Supply Curve Versus

Shift of the Supply Curve

The increase in quantity supplied when

going from point Ato point Breflects a

movement along the supply curve: it is

the result of a rise in the price of the

good. The increase in quantity supplied

when going from point Ato point Cre-

flects a change in supply: this shift to

the right is the result of an increase in

the quantity supplied at any given price.

70 10 11.2 12 15 17

Quantity of coffee beans

(billions of pounds)

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

Price of

coffee beans

(per pound)

A movement

along the supply

curve...

S 1 S 2

A

C

B

... is not the
same thing as
a shift of the
supply curve.

Changes in Input PricesTo produce output, you need inputs. For example, to make

vanilla ice cream, you need vanilla beans, cream, sugar, and so on. An inputis anything

used to produce a good or service. Inputs, like output, have prices. And an increase in

the price of an input makes the production of the final good more costly for those who

produce and sell it. So producers are less willing to supply the final good at any given

price, and the supply curve shifts to the left. For example, newspaper publishers buy

large quantities of newsprint (the paper on which newspapers are printed). When

newsprint prices rose sharply in 1994–1995, the supply of newspapers fell: several news-

papers went out of business and a number of new publishing ventures were canceled.

An inputis anything that is used to produce
a good or service.