Supply Shifters Input Prices Resources price changes have a direct effect on costs and inversely affect supply. Technology Technological change reduces costs and increases supply. Regulations affect costs directly and supply indirectly. The supply of a product is directly related to the number of sellers. Substitutes in Production A rise in the price of an alternative output will shift resources toward that product and away from current uses.
Supply decreases when the price of a substitute in production rises.
Taxes raise costs and reduce supply. Excise taxes are a fixed dollar amount per unit of the item taxed. causes a parallel shift in the supply curve. Ad valorem taxes are a fixed percentage of the price of the item taxed. Supplies across time shift to account for price changes. The Supply Function Supply functions mathematically summarize the supply relationship.