Draw this point on the supply curve directly above the initial point on the curve, but $0.75 higher, as Figure 3.13

shows.

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3.2 • Shifts in Demand and Supply for Goods and Services 63

FIGURE 3.13 Increasing Costs Leads to Increasing Price Because the cost of production and the desired profit

equal the price a firm will set for a product, if the cost of production increases, the price for the product will also

need to increase.

Step 4. Shift the supply curve through this point. You will see that an increase in cost causes an upward (or a

leftward) shift of the supply curve so that at any price, the quantities supplied will be smaller, as Figure 3.14

illustrates.

FIGURE 3.14 Supply Curve Shifts When the cost of production increases, the supply curve shifts upwardly to a

new price level.

Summing Up Factors That Change Supply
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