Supply shifts when something other than the good's own price changes sellers' plans (The Law of Supply), just as demand shifts in Change in Demand vs Change in Quantity Demanded.
Key idea
Supply shifts when input prices, technology, taxes or subsidies on the producer, the prices of other goods the seller could make, sellers' expectations, the number of sellers, or natural conditions such as weather change. An increase in supply shifts the curve right: more offered at every price. A cost increase is a decrease in supply: the curve shifts left (which looks like up).
Why it works
Most shifters work through cost. If flour gets pricier, every loaf costs more to make, so at each price bakers offer fewer loaves: the curve moves left. Seen the other way, the bakers now need a higher price for each quantity: the same curve moves up. Up and left are one move. Technology does the reverse: lower cost per unit, more offered at each price, a shift right (or down). More sellers add their quantities at every price, so market supply moves right.
Worked example: Increase or decrease?
For the supply of bread, classify: (a) the price of wheat rises; (b) a new oven bakes twice as fast; (c) bakers expect bread prices to be much higher next month; (d) three new bakeries open.
- (a) Input cost up: supply decreases (left).
- (b) Better technology: supply increases (right).
- (c) Sellers hold some back to sell later at the higher price: today's supply decreases.
- (d) More sellers: supply increases.
Answer: (a) decrease, (b) increase, (c) decrease, (d) increase.
Common mistake
Reading the upward move after a cost increase as "more supply." On the graph the curve rises, but higher means sellers want more money for each quantity, so they offer less at each price: a decrease. Check: at a fixed price, look across. Is the new curve to the left of the old one? Then supply decreased.