Explain the sources (causes) of supply shift and their effects on equilibrium price and quantity exchanged.
or
Give three reasons for rightward/leftward shift of supply curve.   
or
How do a cost-saving technological progress and increase in input price affect the market price and the quantity exchanged?

(i)    Change in Price of Factor Inputs. An increase in price of factor inputs (i.e., wages, interest, rent etc.) increases the cost of production leading to decrease in supply and thereby shifts the supply curve to the left. Effect? The price of the product increases and quantity exchanged falls. The opposite happens when price of factor inputs falls, i.e., in that case supply curve shifts rightwards leading to decrease in price of the product and increase in quantity exchanged.

(ii)    Technological Progress. Since cost saving technical progress reduces cost of production, it will cause increase in supply. Therefore, technological progress shifts the supply curve to the right. Effect? As a result the price of the product falls and quantity exchanged rises. On the other hand, old and obsolete technology increases cost of production and shifts the supply curve to the left.

(iii)    Increase in Price of Related Good (substitute good) in Production. An increase in price of a substitute good in production shifts the supply curve of the given product to the left (because the producer now prefers to produce the substitute good which gives him more profit). Effect? The price of the given product will increase and the quantity exchanged will decrease. The opposite happens when price of a substitute good falls, i.e., supply curve shifts to the right resulting in a decrease in price of the given product and an increase in quantity exchanged.

(iv)    Change in Excise Duties. An increase in excise duty rates on production of a product shifts its supply curve to the left leading to an increase in the price of the product and fall in quantity exchanged. On the contrary, a decrease in excise duty rates shifts the supply curve to the right resulting in a decrease in price of the product and increase in quantity transacted.

(v)    Number of Firms in the Market. An increase in the number of firms in the market (reflecting greater competition) shifts the market supply curve to the right leading to fall in price of the product and rise in quantity transacted. As against it, a fall in number of suppliers in the market shifts the market supply curve to the left with the effect that price of the product rises and quantity exchanged falls. Obviously, more firms imply more competition and less number of firms implies less competition.

(vi)    Other Factors causing shift in supply are: change in weather conditions, (like floods, droughts), change in goals (objectives) of producers, future expectations of price changes etc.