Supply and the factors that shift it

The supply curve

On the same axes (price vertical, quantity horizontal), the supply curve (S) slopes upwards: at higher prices, producers are willing to supply more because it is more profitable, and higher-cost producers can now cover their costs.

• A change in the product's own price causes a movement along the supply curve.
• Other factors cause a shift: right means more is supplied at every price (supply increases); left means less is supplied (supply decreases).

Factors that shift supply

From the specification:

• Costs of production: rises in wages, raw material or energy costs shift supply left; falls shift it right.
• Introduction of new technology: makes production cheaper or faster, shifting supply right.
• Indirect taxes: taxes on spending, such as VAT or excise duties, raise firms' costs per unit, shifting supply left (upwards by the amount of a per-unit tax).
• Government subsidies: payments to producers lower their costs, shifting supply right.
• External shocks: events such as poor harvests, wars, natural disasters or pandemics that disrupt production, usually shifting supply left.

A common mistake: a fall in demand does not shift supply; it causes a movement along the supply curve.

Worked example

Explain the effect on the supply of coffee of a drought in a major coffee-growing country.

1. A drought is an external shock that destroys part of the harvest.
2. Less coffee can be produced at every price.
3. Supply shifts to the left.

Answer: Supply of coffee shifts left (decreases).

Check yourself

1. A government places a new indirect tax on sugary drinks. What happens to their supply curve?
   • It shifts to the right
   • There is a movement along it
   • It shifts to the left
   • It becomes vertical
   Show answer

   It shifts to the left. The tax raises costs per unit, so less is supplied at each price.

2. A government pays farmers a subsidy for every tonne of wheat produced. What is the effect on wheat supply?
   • It shifts to the right
   • It shifts to the left
   • There is a movement along it
   • Demand shifts left
   Show answer

   It shifts to the right. Subsidies reduce costs, so more is supplied at each price.

3. New robots halve the time taken to assemble a car. What happens to the supply of cars?
   • It decreases (shifts left)
   • Demand for cars shifts right
   • It increases (shifts right)
   • There is a movement along the demand curve
   Show answer

   It increases (shifts right). Technology lowers costs and raises capacity.

4. Which change would shift the supply curve for restaurant meals to the left?
   • A fall in the price of food ingredients
   • A rise in the minimum wage paid to kitchen staff
   • A government subsidy to restaurants
   • A rise in consumer incomes
   Show answer

   A rise in the minimum wage paid to kitchen staff. Higher wages raise costs of production.

5. Explain why the supply curve slopes upwards.
   Show answer

   At higher prices it is more profitable to produce, so existing firms supply more and higher-cost firms can now cover their costs and enter.. Higher prices raise profit, giving an incentive to supply more.

6. Demand for a product falls. Which is correct about its supply curve?
   • It shifts to the left
   • It does not shift; there is a movement down along it
   • It shifts to the right
   • It becomes horizontal
   Show answer

   It does not shift; there is a movement down along it. A demand change moves the market along the supply curve.

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Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business specification (2018)

Last updated 8 November 2026. Spotted a mistake? Tell us.