In the previous section we discussed how price and non-price determinants of supply have different effects on the supply curve:
- Price causes movements along the curve
- Non-price determinants causes shifts of the curve
Movements
A movement along the supply curve occurs when the price of the good or service changes, and this change affects the quantity supplied.
The figure above shows the supply curve of Firm currently producing $Q_1$ of some good $X$ a price of $P_1$.
- If the price rises to $P_2$, the quantity supplied increases to $Q_2$, resulting in an expansion of supply.
- This causes a movement along the curve from the point $A$ to the point $B$.
- Conversely, if the price falls to $P_3$, the quantity supplied decreases to $Q_3$, resulting in a contraction of supply.
- This causes a movement along the curve from the point $A$ to the point $C$.
Movements on the curve are caused only by the change in the price of the good or service itself.
