What causes an upward movement along a supply curve?
Answers
Supply curve moves upward from left to right if there is an increase in price. If prices increase the sellers will be inclined to sell more and producers produce more. This happens when other conditions are not changed such as price of substitutes, change in taste and technology, change in input price and expectation of prices to rise. This is depicted in the above picture.
However sometimes rise in prices does not lead to increase in supply as better substitutes arrive in the market and taste of people change.
After introduction of polyster textile prices became high but supply did not change as input cost was high for textiles. In times of shortages, if sellers expect better price they hold back the stock leading to artificial rise in prices. Even if prices rise supply does not increase. This is depicted in the second picture.
