Explain any two factors that cause a shift of supply curve.

Question

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Answer

Two factors that cause a shift of supply curve are:

Change in Technology: Technological improvement tends to lower the marginal and average costs of production because better technology facilitates higher output with the same inputs. Accordingly, producers are willing to supply more at the existing price. This implies a rightward shift in supply curve and vice-versa.
Change in Input Price: Input price may increase or decrease. In case of increase in input price, marginal and average costs tend to rise. Accordingly, producers will supply less of the commodity at its existing price. This implies a leftward shift in supply curve and vice-versa.

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A decrease in supply will not result in a change in equilibrium quantity if the demand for a commodity is perfectly inelastic.
An decrease in supply will not result in a change in equilibrium price if the demand for a commodity is perfectly elastic.