Effect of supply shift on equilibrium
Also called: Supply shift · Topic: Markets, Equilibrium and Government Intervention · NCERT: Class 12, Ch 5 "Market Equilibrium"
Meaning
A supply shift means sellers offer more or less of a good at every price. With demand unchanged:
- Supply shifts left (for example, when input prices rise and raise marginal cost) → price rises and quantity falls (P↑ Q↓).
- Supply shifts right (for example, better technology or more firms) → price falls and quantity rises (P↓ Q↑).
Rule: price and quantity move in opposite directions. Input prices and technology shift supply, but not demand.
Example
In the salt market, qᴰ = 1,000 − p and qˢ = 700 + 2p, which gives p* = 100 and q* = 900. If input costs rise, supply becomes qˢ = 400 + 2p. The new equilibrium is p* = 200 and q* = 800: price up, quantity down.
Don't confuse with
- Effect of a demand shift: after a demand shift, price and quantity move in the same direction, not opposite directions.