What Shifts the Supply Curve

A movement along the supply curve happens when price changes. A shift of the whole curve happens when something else changes how cheap or profitable it is to produce the good, at every price level at once. The big movers are input prices, technology, the number of sellers, producer expectations, prices of related goods a firm could produce instead, and government policy like taxes and subsidies. Raise the cost of an input and producers need a higher price than before to supply any given quantity, so the curve shifts left (up). Cut input costs, improve technology, or add sellers, and the curve shifts right (down), because producers can now supply more at the same price.

A per-unit tax on sellers works exactly like a cost increase: the government takes a cut of each sale, so sellers effectively need more revenue per unit to cover it, shifting supply left. A per-unit subsidy works the opposite way, acting like a price boost of exactly the subsidy amount, so supply shifts right. Taxes and subsidies on sellers never shift demand, because buyers' willingness to pay for the good hasn't changed, only sellers' cost of providing it has.

This idea scales straight up into aggregate supply. A nationwide shock to input costs, like an oil price spike or a widespread drought raising food-input costs, doesn't just move one firm's curve, it shifts short-run aggregate supply for the whole economy, changing the price level and output together. Seeing supply shifts clearly here is what makes that later jump make sense.