Supply is defined as the quantity the seller is willing to sell at a particular price, at a particular point in time. Supply undertakes various factors, like the price of the commodity, price of the substitute, future expectations, income of the consumer, cost of the inputs, technological advancements, etc. The supply curve is a graphical presentation showing the relationship between the quantity supplied and the price of the commodity. The supply curve typically faces two situations:
- Movement along the Supply Curve
- Shift in the Supply Curve
What is Movement Along Supply Curve?
Movement along the supply curve is defined as the change in quantity supplied due to a change in its price while the other factors remain constant. It is represented graphically as a movement along the same supply curve. There are two cases of movement along the supply curve. It may be either,
- Expansion of Supply (An Upward Movement)
- Contraction of Supply (A Downward Movement)
When there is an expansion in the quantity supplied of a commodity because of a rise in own price of the commodity, by keeping other factors constant, it is known as an Expansion of Supply. It results in an upward movement along the same supply curve. It is also known as an Extension in Supply. When there is a contraction in the quantity supplied of a commodity because of a fall in the respective price by keeping other factors constant, it is known as a Contraction of Supply. The contraction in supply results in a downward movement along the same supply curve.
What is Shift in Supply Curve?
A supply curve is used to show the relationship between a commodity’s price and quantity supplied, assuming that all other factors remain constant. However, sooner or later, other factors will be bound to change. When one of the other factors changes, other than the price of the commodity, then it is referred to as a Shift in the Supply Curve. Thus, changes in supply occur when the supply for a commodity changes as a result of a change in a factor other than the price of the commodity. There are two cases in the shift in the supply curve:
- Increase in Supply (A Rightward Shift)
- Decrease in Supply (A Leftward Shift)
An increase in the supply of a commodity due to factors other than the own price of the commodity is known as an Increase in Supply. In simple terms, the supply for a commodity increases at the same price, because of changes in other factors, other than own price of the commodity. An increase in supply results in a rightward shift in the supply curve. A decrease in the supply of a commodity due to factors other than the own price of the commodity is known as a Decrease in Supply. In simple terms, the supply for a commodity decreases at the same price, because of changes in other factors, other than own prices of the commodity. A decrease in supply results in a leftward shift in the supply curve.
Difference between Movement Along Supple Curve and Shift in Supply Curve
| Basis | Movement Along Supply Curve | Shift in Supply Curve |
|---|---|---|
| Meaning | It includes a change in quantity supplied due to an increase or decrease in price while all other factors remain constant. | It includes a change in supply as a result of a change in variable other than the commodity’s price. |
| Effect on Supply Curve | It includes movement in the same demand curve, either upward (Expansion in Supply) or downwards (Contraction in Supply). | This includes shift in the demand graph either in rightwards (Increase in Supply) or leftwards direction (Decrease in Supply). |
| Reason | Changes in the price of the given commodity is the main reason for Movement along the Supply Curve. | Changes in the price of substitute and complementary goods, changes in income levels, etc. results in a Shift in the Supply Curve. |
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