The determinants/conditions of supply (Non-Economic)

These are the things that affect all producers or all producers in a specific industry. As with the demand curve, there are many things that affect supply as well as the price of the good in question. Notice how similar many of these factors are in comparison to the factors that affect demand. Notice also that nearly all of these factors affect the firms' costs. Given that the firms' supply curve is its marginal cost curve (see the 'costs and revenues' topic) then it is of no surprise that a cost changing measure will shift the supply curve.

Internal Factors

Production Costs. An increase in the price of, say, hops, will increase the costs of a brewing firm and so for any given price the firm will not be able to brew as much beer. Hence, the firm's supply curve will shift to the left. The same would be true for changes in wage costs or fuel costs.
Technology. The supply curve drawn above assumes a 'constant' state of technology. But as we know, there can be improvements in technology that tend to reduce firms' unit costs. These reduced costs mean that more can be produced at a given price, so the supply curve would shift to the right.
Indirect taxes and subsidies. When the chancellor announces an increase in petrol tax (again!), it is the firm who actually pays the tax. Granted, we end up paying the tax indirectly when the price of petrol goes up, but the actual tax bill goes to the firm. This again, therefore, represents an increase in the cost to the firm and the supply curve will shift to the left. The opposite is true for subsidies as they are handouts by the government to firms. Now the firm can make more units of output at any given price, so the supply curve shifts to the right.
Labour productivity. This is defined as the output per worker (or per man-hour). If labour productivity rises, then output per worker rises. If you assume that the workers have not been given a pay rise then the firm's unit costs must have fallen. Training staff to make them more productive. Again, this will lead to a shift to the right of the supply curve.

External Factors
Legal Factors:

law changes that affect a firms costs
law changes that affect a firms production

Political Factors:

imposition or changes to indirect taxes such as GST or excise duties
provision of subsidies to a firm

Trade Factors:

tariffs (taxes) on imports or exports
the exchange rate which affects the cost of imports and the value of exports
trade agreements which allow greater access to overseas markets

Environmental Factors:

changes to production to be more environmentally friendly

Cultural Factors:

ownership of necessary resources that may be given or returned to local tribal organisation.
meeting cultural protocols in production, e.g. to supple halal meat.

As with demand, we must now look at the difference between a movement along a supply curve and a shift of a supply curve. Those of you who have looked at the 'Demand curve' Learn It should know exactly what is coming next!

	Created by cian.buckley+1 about 9 years ago

	Copied by Tsungi Sikireta about 9 years ago

Notes on Supply and Demand including the Supply Curves and the Demand Curves. Copied and Edited. Credits to: www.s-cool.co.uk/ & "Level 1 Economics Learning Workbook" by Phillip Jellyman.