Econweb Intro Micro Demand and Supply: Supply Shifts

To the right, we show a decrease, or shift back, in supply. The supply curve representing reduced supply is "higher" than the original curve representing greater supply. For this reason we usually write that supply has shifted "back," or "back and to the left," or "to the left" rather than "up."

When supply is given by S₁ and the market price is 12, 27 units are supplied, but after supply shifts back to S₂, the same price leads to a supply of 9 units. When the market price is 16, if supply is given by S₁, 36 units are supplied, but when supply falls to S₂, only 18 units are supplied.

Supply curve S₁ can be written as:

Q_S1 = (2.25)*P

Supply curve S₂ can be written as:

Q_S2 = (2.25)*(P-8)