Class 11 Micro Economics Notes · CBSE

Change in Supply

Change in Supply — understanding how increases and decreases in supply shift the supply curve and change equilibrium price and quantity. CBSE Class 11 Microeconomics notes with graphs.

Last updated: 16 Sep 2026

Notes

What Shifts the Supply Curve

Change in Supply (Shift in the Supply Curve)

Change in supply or shift in the supply curve occurs due to change in any of the factors that were assumed constant under the law of supply. The change may be either an ‘Increase in Supply’ or ‘Decrease in Supply’.

Change in prices of factors of production

Change in prices of other goods

Change in the state of technology

Change in the taxation policy

Expectation of change in price in future

Change in the goals of firms

Change in the number of firms

Direction rule (from Chapter 9 — Supply): increase in supply shifts the supply curve rightward; decrease in supply shifts it leftward. Rightward shift causes: fall in input prices, technological upgradation, favourable taxation policy, increase in subsidies, increase in the number of firms — the opposites cause a leftward shift.

Increase in Supply

When there is an increase in supply, demand remaining unchanged, the supply curve shifts towards right from SS to S₁S₁.

Original Equilibrium is determined at point E, when the demand curve DD and the original supply curve SS intersect each other. OQ is the equilibrium quantity and OP is the equilibrium price.

Increase in Supply

When supply increases to S₁S₁, it creates an excess supply at the old equilibrium price of OP.

This leads to competition among sellers, which reduces the price.

Decrease in price leads to a rise in demand and a fall in supply.

These changes continue till the new equilibrium is established at point E₁.

Equilibrium price falls from OP to OP₁ and equilibrium quantity rises from OQ to OQ₁.

Decrease in Supply

When the supply decreases, demand remaining unchanged, then the supply curve shifts to the left from SS to S₂S₂.

Decrease in Supply

When supply decreases to S₂S₂, it creates an excess demand at the old equilibrium price of OP.

This leads to competition among buyers, which raises the price.

Increase in price leads to a rise in supply and a fall in demand.

These changes continue till the new equilibrium is established at point E₂.

Equilibrium price rises from OP to OP₂ and equilibrium quantity falls from OQ to OQ₂.

For ‘Effect on equilibrium price and quantity due to increase in number of firms and increase in price of inputs’, refer to HOTS.

Key Takeaways

A change in supply is a shift of the whole supply curve, caused by any factor assumed constant under the law of supply — not by the price of the commodity itself. ⭐
The seven shifters: factor prices, prices of other goods, state of technology, taxation policy, future price expectations, goals of firms, and the number of firms. ⭐
Increase in supply (rightward shift, demand unchanged): equilibrium price falls and equilibrium quantity rises. ⭐
Decrease in supply (leftward shift, demand unchanged): equilibrium price rises and equilibrium quantity falls. ⭐
The adjustment runs through the old price: a rightward shift creates excess supply at OP, sellers compete, price falls until E₁; a leftward shift creates excess demand, buyers compete, price rises until E₂. ⭐