Question
Explain the difference between "Shift of Supply Curve" and "Movement along Supply Curve". State one factor responsible for each. Use diagrams.
✓
Answer
Shift of supply curve takes place when there is a change in supply due to a factor other than own-price of the good. For example, suppose tax rate on the good is reduced. This reduces cost and shifts the supply curve from S1 to S2. Price remaining unchanged. Supply increases from OQ1 to OQ2.
Movement along the supply curve takes place when there is change in own price of the good. Suppose own price rises, this expands supply. The change is shown along the same supply curve S, from A to B leading to change in quantity supplied from OQ1 to OQ2.
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