What is the only thing that can change the quantity supplied for a good?

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Definition of Change in Quantity Supplied:
Detailed Explanation:
Learning Objectives
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Definition of Change in Quantity Supplied:

A change in quantity supplied is the change in the quantity a producer is willing to supply when there has been a change in the market price of the good or service it sells.

Detailed Explanation:

A company's supply curve illustrates the number of goods and services the company is willing to supply at every price. The quantity supplied is represented by a point on the supply curve and is the amount a producer is willing to supply of a good or service at a specific price. A supply curve slopes upward because higher prices result in higher profits and induce suppliers to increase production. The supply curve also assumes the production process and outside influences are held constant, including the technology, input costs, regulations, the number of firms in the industry, future expectations, regulations, and tax rates. A change in any of these results in a new supply curve, which economists refer to as a change in supply. It is important to distinguish between a change in the quantity supplied and a change in supply. The graphs below illustrate the difference. On Graph 1, Jane the babysitter is willing to babysit 35 hours per month at $8.00 per hour, but 37 hours per month if she could raise her price to $9.00 an hour. Her quantity supplied has increased by 2 hours per month, only because she is able to charge a higher price. A change in price causes movement along the supply curve, or a change in the quantity supplied.

The most common reason for a change in supply is a change in the cost to provide the good or service. Technological improvements or input costs may change the cost to manufacture a product. Manufacturers are willing to furnish more of a good or service at all prices if their cost to produce the good decreases. For example, assume the price of gasoline falls $1.00 per gallon. Jane is thrilled because she can expand her market. Jane is willing to increase her babysitting hours from 35 per month to 45 per month - even if she doesn't change her price. In fact, Jane is willing to babysit more hours at every price. This is illustrated by a rightward shift of her supply curve on Graph 2. An easy test to identify whether there would be a change in supply or a change in the quantity supplied is to ask, "Would a producer change the amount supplied if there is no change in price?". If the answer is "Yes", then there would be a change in the supply. "No" means there is a change in the quantity supplied. Whether a small price increase results in a relatively large or small increase in the quantity supplied depends on the producer's price elasticity of supply. Firms with an elastic supply will respond quickly and aggressively to a price change. Perhaps a company has excess capacity and is able to quickly add workers if there is a price increase. Companies with an inelastic supply curve will not respond as vigorously to price changes. In this case the company may already be operating near capacity and unable to quickly ramp up production in response to a price increase.

Supply – The Producer's Perspective
Change in Supply – When Producer Costs Change
Price Elasticity of Supply – How Does a Producer Respond to a Price Change
Supply and Demand – Producers and Consumers Reach Agreement

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Learning Objectives

Describe the differences between changes in demand and changes in the quantity demanded
Describe the differences between changes in supply and changes in quantity supplied

It’s hard to overstate the importance of understanding the difference between shifts in curves and movements along curves. Remember, when we talk about changes in demand or supply, we do not mean the same thing as changes in quantity demanded or quantity supplied.

A change in demand refers to a shift in the entire demand curve, which is caused by a variety of factors (preferences, income, prices of substitutes and complements, expectations, population, etc.). In this case, the entire demand curve moves left or right.

Figure 1. Change in Demand. A change in demand means that the entire demand curve shifts either left or right. The initial demand curve D0 shifts to become either D1 or D2. This could be caused by a shift in tastes, changes in population, changes in income, prices of substitute or complement goods, or changes future expectations.

A change in quantity demanded refers to a movement along the demand curve, which is caused only by a change in price. In this case, the demand curve doesn’t move; rather, we move along the existing demand curve.

Figure 2. Change in Quantity Demanded. A change in the quantity demanded refers to movement along the existing demand curve, D0. This is a change in price, which is caused by a shift in the supply curve.

Similarly, a change in supply refers to a shift in the entire supply curve, which is caused by shifters such as taxes, production costs, and technology. Just like with demand, this means that the entire supply curve moves left or right.

Figure 3. Change in Supply. A change in supply means that the entire supply curve shifts either left or right. The initial supply curve S0 shifts to become either S1 or S2. This is caused by production conditions, changes in input prices, advances in technology, or changes in taxes or regulations.

A change in quantity supplied refers to a movement along the supply curve, which is caused only by a change in price. Similar to demand, a change in quantity supplied means that we’re moving along the existing supply curve.

Figure 4. Change in Quantity Supplied. A change in the quantity supplied refers to movement along the existing supply curve, S0. This is a change in price, caused by a shift in the demand curve.

Here’s one way to remember: a movement along a demand curve, resulting in a change in quantity demanded, is always caused by a shift in the supply curve. Similarly, a movement along a supply curve, resulting in a change in quantity supplied, is always caused by a shift in the demand curve.

Watch this video for another demonstration of the important distinction between these terms.

Try graphing each of these situations to determine if they cause a shift in demand, quantity demanded, supply, or quantity supplied.

demand: the relationship between the price and the quantity demanded of a certain good or service quantity demanded: the total number of units of a good or service consumers are willing to purchase at a given price quantity supplied: the total number of units of a good or service producers are willing to sell at a given price shift in demand: when a change in some economic factor (other than price) causes a different quantity to be demanded at every price shift in supply: when a change in some economic factor (other than price) causes a different quantity to be supplied at every price supply: the relationship between price and the quantity supplied of a certain good or service