When a demand curve shifts, it will then intersect with a given supply curve at a different equilibrium price

and quantity. We are, however, getting ahead of our story. Before discussing how changes in demand can affect

equilibrium price and quantity, we first need to discuss shifts in supply curves.

How Production Costs Affect Supply

A supply curve shows how quantity supplied will change as the price rises and falls, assuming ceteris paribus

so that no other economically relevant factors are changing. If other factors relevant to supply do change, then

the entire supply curve will shift. Just as we described a shift in demand as a change in the quantity demanded

at every price, a shift in supply means a change in the quantity supplied at every price.

In thinking about the factors that affect supply, remember what motivates firms: profits, which are the

difference between revenues and costs. A firm produces goods and services using combinations of labor,
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