Lessons 23 · 1 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
23
Other factors that affect supply
Textbook: pp. 100–103
GoalLists the non-price factors affecting supply (resource prices, technology, taxes and benefits, price expectations, number of sellers, other sources of profit, prices of other goods) and finds the shift of the supply curve.
New words
resource prices: the cost of inputs such as raw materials, labour and energy · resurslar narxitechnology: the way of producing; better technology cuts costs and raises output · texnologiyataxes and benefits: payments to the state and relief given to producers · soliq va imtiyozlarshift of supply: the whole curve moving right or left because of non-price factors · taklifning siljishi
Explanation
Supply can change even if the price does not, and then the whole S curve shifts. If resource prices rise, production becomes dearer and supply falls (curve left); if they fall, supply rises. New, more productive technology cuts costs and raises supply. If taxes on the producer rise, supply falls; with tax relief or a benefit it rises. If a price rise is expected, a seller may keep goods back for later instead of selling now, so current supply falls. If the number of sellers grows, supply rises. If another crop becomes more profitable, a farmer gives land to it and the supply of the first crop falls. If supply rises the curve shifts right (S1); if it falls, left (S2). A change in the good’s own price is only a movement along the curve.
Worked examples
In a bakery the price of flour rose from 6 000 to 7 500 so‘m per kg. 400 kg of flour are used a day. The daily flour cost grew by (7 500 – 6 000) · 400 = 600 000 so‘m. After the cost rise, bread supply falls and the S curve shifts left.
A sewing workshop installed new sewing machines: a worker now makes 12 shirts a day instead of 8. With 25 workers, daily output rose from 25 · 8 = 200 to 25 · 12 = 300. Because technology improved, supply rose and the S curve shifted right.
Class activity
“Market morning”: each group picks one good and names two factors affecting supply (one raising, one lowering), then shifts the S curve right or left on the board.
Practice
1
How does a shift of the supply curve differ from a movement along it?
A movement comes from a change in the good’s own price; a shift comes from other factors (resource prices, technology, taxes and so on).
2
How does better technology affect supply, and which way does the curve shift?
Costs fall and supply rises; the curve shifts right.
3
In a workshop 30 workers make 9 items each a day. What is the daily output?
270
4
The price of fabric rose from 20 000 to 25 000 so‘m per metre. By how many so‘m did the cost of 150 m grow?