Non-Price Supply Factors

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📚 Part 1: Brief Teaching & Multiple Choice

Read the short explanation, then answer questions 1–4.

Law of supply: Producers will supply more of a good or service when its price rises, and less when its price falls, ceteris paribus (all other factors held constant).

PETROLLCC is an acronym for common non-price factors that shift supply. Each letter stands for a different factor:

P — Productivity (including new technology that increases output per worker).
E — Expectations (producers’ expectations about future prices or shortages).
T — Taxes and subsidies (government charges or payments to producers).
R — Resource costs (prices of raw materials, energy, parts).
O — Other goods (prices of alternative goods producers could make).
L — Labour (availability and cost of workers).
L — Location & logistics (transport, distance to markets, ports).
C — Capital (availability of machinery, buildings, finance).
C — Climate & natural events (weather, floods, droughts, biosecurity).

1. Which sentence best describes the law of supply?

Producers will always supply the same amount regardless of price.

Producers supply more when price rises and less when price falls, ceteris paribus.

Consumers buy more when price rises.

Government sets supply levels, so price has no effect.

2. A kiwifruit orchard installs automated pickers that speed up harvesting. Which PETROLLCC factor does this represent?

R — Resource costs

P — Productivity

C — Climate

T — Taxes

3. The government increases fuel taxes for transporters. Which factor shifts supply for transported goods?

E — Expectations

T — Taxes and subsidies

O — Other goods

L — Labour

4. Check all items that are examples of non-price supply factors (PETROLLCC):

A sudden drought reducing crop yields

A rise in the market price of the good

A new factory machine increasing output

A change in transport costs

✏️ Part 2: Short Answers

5. In one sentence, explain the difference between a movement along the supply curve and a shift of the supply curve.

6. Fill in the blanks to complete PETROLLCC (use the words from the teaching above):

P = ___________ ; E = ___________ ; T = ___________ ; R = ___________

7. Give a real New Zealand example (one or two sentences) of a PETROLLCC factor that recently affected supply in an industry (fruit, dairy, forestry, fishing, etc.). Explain which letter applies and why.

8. A producer expects higher prices next season. According to PETROLLCC, which letter covers this and how might current supply change because of the expectation?