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tastes and preferences, composition or size of the population, prices of related goods,
number and scale of buyers, expectations about future conditions and prices.
A change in any one of the underlying factors that determine what quantity
people are willing to buy at a given price will cause a shift in demand. Graphically,
the new demand curve lies either to the right (an increase) or to the left (a decrease)
of the original demand curve. Notice that a change in the price of the good or service
itself is not listed among the factors that can shift a demand curve. A change in the
price of a good or service causes a movement along a specific demand curve, and it
typically leads to some change in the quantity demanded, but it does not shift the
demand curve.

When economists talk about supply, they mean the amount of some good or
service a producer is willing to supply at each price. Price is what the producer
receives for selling one unit of a good or service. A rise in price almost always leads
to an increase in the quantity supplied of that good or service, while a fall in price
will decrease the quantity supplied. Economists call this positive relationship between
price and quantity supplied – that a higher price leads to a higher quantity supplied
and a lower price leads to a lower quantity supplied – the law of supply.
In economic terminology, supply is not the same as quantity supplied. When
economists refer to supply, they mean the relationship between a range of prices and
the quantities supplied at those prices, a relationship that can be illustrated with a
supply curve or a supply schedule. When economists refer to quantity supplied, they
mean only a certain point on the supply curve, or one quantity on the supply
schedule. In short, supply refers to the curve and quantity supplied refers to the
(specific) point on the curve.
A supply curve is a graphic illustration of the relationship between price,
shown on the vertical axis, and quantity, shown on the horizontal axis (Figure 5.2).

Figure 5.2 A Supply Curve

A supply curve shows how quantity supplied will change as the price rises and
falls. If other factors relevant to supply do change, then the entire supply curve will
shift. Just as a shift in demand is represented by a change in the quantity demanded at
every price, a shift in supply means a change in the quantity supplied at every price.
Changes in the cost of inputs, natural disasters, new technologies, and the
impact of government decisions – determinants of supply – all affect the cost of
production. In turn, these factors affect how much firms are willing to supply at any
given price. Notice that a change in the price of the product itself is not among the
factors that shift the supply curve. Although a change in price of a good or service
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