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Demand Demand-Supply-SupplyShift.gif pg-7
Supply Shifts Back when the Price Rises of Another Product Produced by the Firm

A small furniture company makes two kinds of oak chairs: chairs with armrests and chairs without. The graph to the right shows the company's supply for oak chairs without armrests. If chairs with armrests become more popular, the market price for these chairs will rise. This will mean that making chairs with armrests is more profitable than it was, so the supply curve for chairs without armrests will shift back.

The supply curve for chairs with armrests isn't shown. S1 is the supply curve for chairs without armrests before the price rises for chairs with armrests. S2 is the reduced supply for chairs without armrests after the price of chairs with armrests increases.

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