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Demand Demand-Supply-SupplyShift.gif pg-9
Supply Shifts out when New Firms Enter an Industry

Suppose supply curve S1 to the right is the total supply of Wi-Fi (802.11b and 802.11g)25 wireless routers last year, and S2 is the supply this year. Wireless broadband routers have become very popular and the number of providers has expanded quickly over the last few years. These curves aren't based on any actual data, we are just using Wi-Fi as a recent example of a market where supply shifts out due to the entry of more firms.

In our hypothetical example, on supply curve S1, when wireless routers sell for $150 only 250 are supplied per day; and when they sell for $240, 550 per day are supplied. After supply shifts out to S2 1250 are supplied when the price is $150; and if they sell for $240, then 1550 would be supplied per day. The increase in supply means that at every price more of these wireless access points are being offered for sale.

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Wi-Fi devices allow computers to use internet connections wirelessly. Routers allow several computers to share a internet connection. Wi-Fi is particularly popular with owners of laptop computers. The technology was first popularized in 1999 by Apple Computer under the name AirPort, but now many companies sell wireless broadband routers, and prices have fallen and sales have increased over the last several years.

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