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Non-Price Supply Factors

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Non-Price Supply Factors

You are advising a group of New Zealand producers. Use the case files and PETROLLCC to decide what changes supply. Remember: a change in the good’s own price causes movement along a supply curve; a non-price factor shifts the whole curve.

Quick reference: PETROLLCC

Non-price factors can shift supply. P Productivity; E Expectations; T Taxes and subsidies; R Resource costs; O Other goods producers could make; L Labour; L Location and logistics; C Capital; C Climate and natural events. A factor that lowers production costs or improves capacity generally increases supply; one that raises costs or reduces capacity generally decreases supply, other things equal.

A. An apple grower installs sorting equipment that lets the same workforce pack more fruit each day.

B. A dairy processor faces a higher electricity price, raising the cost of running its factory.

C. A vineyard expects the price of grapes to be much higher next season, so it stores some grapes rather than selling them now.

D. A subsidy helps a seafood business buy a new processing machine.

E. A drought reduces pasture growth and the amount of milk farms can produce.

F. A forestry company shifts land from growing pine trees to growing another crop that has become more profitable.

Investigate the shifts

For Questions 1–6, refer to the matching case file above.

1.Case A: Identify the PETROLLCC factor and state whether apple supply increases or decreases. Explain the production effect.

2.Case B: Identify the factor and predict the direction of the supply shift for dairy products, other things equal.

3.Case C: Which factor applies? Explain why expected future prices can affect how much is supplied now.

4.Case D: Name the factor and explain how the subsidy may affect seafood supply.

5.Case E: Identify the factor and explain its likely effect on milk supply.

6.Case F: Which PETROLLCC factor best fits? Explain why the company’s choice can reduce the supply of pine logs even if pine-log prices do not change.

7.A beekeeper sells honey at a higher market price this week. If nothing else changes, is this a shift of the supply curve or a movement along it? Explain.

A shift right, because all higher prices increase supply factors.
A shift left, because higher prices reduce production.
A movement along the supply curve, because the good’s own price changed.
No change in quantity supplied.

8.A transport bottleneck closes a key route to market, increasing delivery delays and costs for kiwifruit exporters. Identify the best-fitting factor and predict the likely change in supply reaching export markets.

9.A factory adds production lines after obtaining a long-term loan. Which factor most directly explains the increased production capacity?

L — Labour
C — Capital
E — Expectations
C — Climate

10.Write a two-step explanation of how a shortage of seasonal workers could affect horticultural supply: name the PETROLLCC factor, then describe the production and supply effect.