messages more cheaply than before. Since lower costs correspond to higher profits, the messenger company

may now supply more of its services at any given price. For example, given the lower gasoline prices, the

company can now serve a greater area, and increase its supply.

Conversely, if a firm faces higher costs of production, then it will earn lower profits at any given selling price for

its products. As a result, a higher cost of production typically causes a firm to supply a smaller quantity at any

given price. In this case, the supply curve shifts to the left.

Consider the supply for cars, shown by curve S0 in Figure 3.10. Point J indicates that if the price is $20,000, the
quantity supplied will be 18 million cars. If the price rises to $22,000 per car, ceteris paribus,the quantity
supplied will rise to 20 million cars, as point K on the S0 curve shows. We can show the same information in
table form, as in Table 3.5.
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