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Question
Explain the distinction between “change in quantity supplied’ and “change in supply”. Use diagram.
Solution
| Basis | Change in Supply | Change in Quantity Supplied |
| 1. Meaning | Assume that the price remain constant, there is change in the supply because of change in other variables such as technological change, input prices, unit tax and price of other related goods. |
Assume that other variables remain constant, there is a change quantity supplied because of the change in the own price of a good. |
| 2. Functional relation |
`Q_x=f(barP_X,P_Y,P_F,T,G,G_p,N_F)` where `barP_X="Own price of a good"` `P_Y="Price of related goods"` `P_F="Price of factors of production"` `T="State of technology"` `G="Goal of the firm"` `G_p="Government policy"` `N_F="Number of firms"`
|
`Q_x=f(P_x,barP_y,barT,bar(P_F),barG,barG_p,barN_F)` where `barP_x="Own price of a good"` `barP_y="Price of related goods"` `bar(P_F)="Price of factors of production"` `barT="State of technology"` `barG="Goal of the firm"` `barG_p="Government policy"` `barN_F="Number of firms"`
|
| 3. Shift and Movement | The supply curve of the firm will shift rightward or leftward. | The supply curve of the firm will move upwards or downwards. |
| 4. Types | Shift in the supply curve— increase in supply and decrease in supply. | Movement along a supply curve—expansion of supply and contraction of supply. |
| 5. Diagram for increase/expansion |
Increase in supply
|
Expansion in supply
|
| 6. Diagram for decrease/contraction |
Decrease in supply
|
Contraction in supply
|
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