Page 107 - Krugmans Economics for AP Text Book_Neat

table 6.1

Factors That Shift Supply

Changes in input prices
If the price of an input used to produce A rises, . . . . . . supply of A decreases (shifts Section 2 Supply and Demand
to the left).
If the price of an input used to produce A falls, . . . . . . supply of A increases (shifts
to the right).
Changes in the prices of related goods or services
If A and B are substitutes in production . . . . . . and the price of B rises, . . . . . . supply of A decreases.
. . . and the price of B falls, . . . . . . supply of A increases.
If A and B are complements in production . . . . . . and the price of B rises, . . . . . . supply of A increases.
. . . and the price of B falls, . . . . . . supply of A decreases.
Changes in technology
If the technology used to produce A improves, . . . . . . supply of A increases.
Changes in expectations
If the price of A is expected to rise in the future, . . . . . . supply of A decreases today.
If the price of A is expected to fall in the future, . . . . . . supply of A increases today.
Changes in the number of producers
If the number of producers of A rises, . . . . . . market supply of A increases.
If the number of producers of A falls, . . . . . . market supply of A decreases.

fyi

Only Creatures Small and Pampered
During the 1970s, British television featured a have grown, the demand for pet veterinarians doting owners to spend on their companions’
popular show titled All Creatures Great and has increased sharply. As a result, vets are care, has driven up the price of pet veterinary
Small. It chronicled the real life of James Her- being drawn away from the business of caring services. As a result, fewer and fewer veterinari-
riot, a country veterinarian who tended to cows, for farm animals into the more lucrative busi- ans have gone into farm animal practice. So the
pigs, sheep, horses, and the occasional house ness of caring for pets. As one vet stated, she supply curve of farm veterinarians has shifted
pet, often under arduous conditions, in rural began her career caring for farm animals but leftward—fewer farm veterinarians are offering
England during the 1930s. The show made it changed her mind after “doing a C-section on a their services at any given price.
clear that in those days the local vet was a criti- cow and it’s 50 bucks. Do a C-section on a Chi- In the end, farmers understand that it is all a
cal member of farming communities, saving huahua and you get $300. It’s the money. I hate matter of dollars and cents—that they get
valuable farm animals and helping farmers sur- to say that.” fewer veterinarians because they are unwilling
vive financially. And it was also clear that Mr. How can we translate this into supply and to pay more. As one farmer, who had recently
Herriot considered his life’s work well spent. demand curves? Farm veterinary services and lost an expensive cow due to the unavailability
But that was then and this is now. According pet veterinary services are like gasoline and of a veterinarian, stated, “The fact that there’s
to a 2007 article in the New York Times, the fuel oil: they’re related goods that are substi- nothing you can do, you accept it as a business
United States has experienced a severe decline tutes in production. A veterinarian typically spe- expense now. You didn’t used to. If you have
in the number of farm veterinarians over the cializes in one type of practice or the other, and livestock, sooner or later you’re going to have
past two decades. The source of the problem is that decision often depends on the going price deadstock.” (Although we should note that this
competition. As the number of household pets for the service. America’s growing pet popula- farmer could have chosen to pay more for a vet
has increased and the incomes of pet owners tion, combined with the increased willingness of who would have then saved his cow.)

module 6 Supply and Demand: Supply and Equilibrium 65