Following are differences between movement and shifts along the original supply curve:
Movement along the Supply Curve:
While explaining the law of supply we have stated that as price rises, the quantity supplied increases and as price falls the quantity supplied decreases, other things remaining the same. This change in the quantity supplied of a commodity is a movement of one price-quantity combination to another on the same supply curve. Such a movement at varying prices is now illustrated with the help of the supply curve given in the diagram 5.2.
In above diagram (5.2) at price “a” ($3), the quantity “T” 50 units are supplied (aT is price-quantity combination). When price rises to point dL ($7), the quantity supplied by the producers increases to OL (110 units). The change in quantity supplied at varying prices is referred as movement along the same supply curve.
Shifts in Supply Curve:
Shifts in supply curve means changes in supply. While explaining the law of supply, we have stated that that other things remaining the same (ceteris paribus) the amount of the commodity offered for sale increases with the rise in price and decreases with a fall in price. When there is an increase in supply due to one or more than one non-price factor (which was held constant) such as production techniques, resource prices, changes in the price of other commodities, etc., there is a rise in supply. The entire supply curve shifts to the right of original supply curve indicating that more quantity is offered for sale at the same price per time period.
If due to one or a combination of non-price factors, less quantity is brought into the market for sale at each price, the supply is said to have fallen. In case of fall in supply, the supply curve shifts to the left of the original supply curve.
Explanation with Schedule and Diagram:
The rise and fall of supply curve (shifts in supply curve) is explained with the help of an imaginary schedule and a diagram below:
In diagram (5.3) SS1 is the original supply curve, and S2S2 to the right of the original supply curve shows an increase in the quantity supplied at each price. S3S3 supply curve to the left of original supply curve to the left of original supply curve indicates a decrease in supply at each price over a specified period of time.