U1 AOS2 - Lesson 7 - NPF Influencing Supply (Shift) Flashcards
Non Price Factor:
Change in Cost of Production
- Cost of Production: Includes wages and cost of raw materials
- Increase in cost of production → profit made per unit decreases → producers less willing to supply the product to the market → decrease supply
Non Price Factor:
Technology
- Improvements to technology → more efficient to produce goods/services → reduces cost of production → increase profit per unit → increase producers’ willingness to supply → increase supply
VCAA 2023 (Sample):
Question 3
Which one of the following factors is likely to result in a shift of the supply curve for fresh vegetable juices to the right?
A. an increase in interest rates
B. an increase in the price of vegetables
C. an increase in the wages paid to employees
D. an increase in the profitability for juice-making firms
D
VCAA 2021
Question 2
Which of the following would most likely be the effect on the fruit market of a shortage of fruit pickers during a harvesting period?
A. a decrease in supply to the market and higher prices
B. a decrease in demand in the market and lower prices
C. an increase in supply to the market and lower prices
D. an increase in demand in the market and higher prices
A
VCAA 2019
Question 8
Which one of the following is a supply side solution to electricity shortages?
A. requesting industries to reduce their production during heatwaves
B. electricity companies charging consumers higher prices during heatwaves
C. rewarding customers with cash bonuses for limiting their electricity use during peak times
D. giving electricity companies government subsidies to invest in increased production
D
Coles has announced $880m to develop an ambient automated distribution centre in Melbourne’s West.
Outline the impact that this will have on supply.
Technological advancement → Coles can distribute their goods to their stores more efficiently, accurately and with less wages expense → increase profit for each good → increase willingness to supply → increase supply
Assume the government introduces an excise tax on all non-recycled plastic products.
Outline the impacts on the market for plastic bottles.
Construct a supply and demand graph that represents the change.
Excise tax on plastic → increased cost of production → decreased profit on each unit → decreased willingness for producers to produce → decrease supply at any given price
The government wants to develop the technology sector in Ballarat. To do this, they subsidise software developers who produce enterprise software, such as inventory management systems and payroll systems.
Construct a supply and demand graph that represents this change.
Horizontal supply curve as software is a virtual good so is unlimited
The government subsidises fares on the VLine Ballarat to Melbourne service to $11 return (Feb 2025), which has fallen from the previously subsidised $45.60 (March 2023).
Represent these changes on a demand and supply graph.
Point of Difference between movement along supply curve and shift of supply curve
- Point of Difference = whether it is caused by a price or non-price factor
- Movement along supply curve includes contractions/expansions. Caused by changes to price, which in turn are caused by non-price demand factors
- Shift of demand curve caused by non-price supply factors (such as changes to cost of production)
List the non-price factors influencing supply
- Changes in the costs of production
- Technology
- Productivity
- Climatic conditions
A shift of the supply curve to the left represents
A decrease in the quantity supplied at any given price
A shift of the supply curve to the right represents
An increase in the quantity supplied at any given price
What is the impact of a shift of the supply curve to the left?
- Shift of the curve to the left = decrease quantity supplied at any given price
- Without a change in the price from E1, a temporary shortage will form
- Market forces will place upward pressure on price, with consumers who want the good/service more being willing to pay a higher price
- Therefore, will result in a decrease in quantity and increase in price
What is the impact of a shift of the supply curve to the right?
- Shift of the curve to the right = increase quantity supplied at any given price
- Without a change in the price from E1, a temporary surplus will form
- Market forces will place downward pressure on price to reach a market clearing price
- Therefore, will result in a increase in quantity and decrease in price
What types of taxes cause a shift of the supply curve?
Indirect taxes - eg. Excise taxes → increase cost of production
List all the factors which could cause this situation in the market
- Increase in the costs of production
- Unfavourable change in technology (eg. tech faults)
- Decrease in productivity
- Unfavourable climatic conditions and other disruptions
List all the factors which could cause this situation in the market
- Decrease in the costs of production
- Favourable change in technology
- Increase in productivity
- Favourable climatic conditions
