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Shifts in supply

15 二月, 2016 - 09:58

Whenever technology changes, or the costs of production change, or the prices of competing products adjust, then one of our ceteris paribus assumptions is violated. Such changes are generally reflected by shifting the supply curve. Figure 3.3 illustrates the impact of the arrival of just-in-time technology. The supply curve shifts, reflecting the ability of suppliers to supply the same output at a reduced price. The resulting new equilibrium price is lower, since production costs have fallen. At this reduced price more gas is traded at a lower price.

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Figure 3.3 Supply shift and new equilibrium 
 

The supply curve shifts due to lower production costs. A new equilibrium E_1 is attained in the market at a lower price.