0
$\begingroup$

I was having some trouble understanding the Law of Supply, and I now understand that I was looking at it from the wrong perspective.

Now, I'm confused with shifts in the Supply Curve. After reading through the answers in the thread, I think I'm on the right track.

However, some of the material I'm studying doesn't make sense. Take a look at my study material below. If you were to shift the image 45 degrees counter clock-wise, yes the curve would shift left, but that doesn't indicate "a smaller quantity at any given price".

It's the same quantity, isn't it? I hope I'm not missing something completely obvious. My apologies if I am, and thank you for your input.

enter image description here

I googled "shift in supply", and below is what I was expecting:

enter image description here

Improve this question
$\endgroup$
2
  • $\begingroup$ What does "shift the image 45 degrees counter clock-wise" mean? $\endgroup$
    – Giskard
    Commented Jan 4, 2018 at 7:43
  • $\begingroup$ The top graph is the material which I have to study. The highlighted text says "supply will shift to the left" as in Exhibit 4. The graph doesn't shift left, it moves up. The curve below is what I found in google after searching for "supply shift". $\endgroup$
    – Nahuatl
    Commented Jan 4, 2018 at 8:33

2 Answers 2

Reset to default
0
$\begingroup$

The thing to understand is every shift in a supply curve (and also in a demand curve) can be interpreted in two ways.

A leftward shift of the supply curve is also an upward shift of the supply curve:

  1. Leftward shift: At every price, producers are willing to produce and sell fewer units of the good.

  2. Upward shift: In order to get producers to sell any given number of units of the good, we must offer them a higher price.

Similarly, a rightward shift of the supply curve is also a downward shift of the supply curve:

  1. Rightward shift: At every price, producers are willing to produce and sell more units of the good.

  2. Downward shift: In order to get producers to sell any given number of units of the good, we can offer them a lower price.

There are thus two complementary (and equally correct) ways to interpret any shift in the supply curve. (And likewise for demand curves.)

Note: Your textbook here is simply wrong or at the very least deeply confusing. (The text says "supply will shift to the left" and refers to the diagram, but the diagram shows upward arrows.) The writer may have been thinking of the above, but did a bad and confusing job explaining himself. So let's just ignore your textbook altogether.

Improve this answer
$\endgroup$
1
$\begingroup$

The figure from your study material looks very much like the one you found via Google. In particular, it shows a leftward shift in supply and a corresponding reduction in quantity supplied for any price. We can confirm this with a minor edit to the figure:

enter image description here

Improve this answer
$\endgroup$
1
  • $\begingroup$ Ok I see. So I assume the arrows on my original image are just a little misleading by pointing up instead of left. That's why I was getting confused. $\endgroup$
    – Nahuatl
    Commented Jan 4, 2018 at 9:17

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.