When the suppliers' costs change for a given output, the supply curve shifts in the same direction. For example, assume that someone invents a better way of growing wheat so that the cost of wheat that can be grown for a given quantity will decrease. Otherwise stated, producers will be willing to supply more wheat at every price and this shifts the supply curve S1 to the right, to S2 —an increase in supply . This increase in supply causes the equilibrium price to decrease from P1 to P2 . The equilibrium quantity increases from Q1 to Q2 as the quantity demanded increases at the new lower prices. Notice that in the case of a supply curve shift, the price and the quantity move in opposite directions.

Conversely, if the quantity supplied decreases at a given price, the opposite happens. If the supply curve starts at S2 and then shifts leftward to S1 , the equilibrium price will increase and the quantity will decrease. This is purely an effect of supply changing. The quantity demanded at each price is the same as before the supply shift (at both Q1 and Q2 ). The reason that the equilibrium quantity and price are different is the supply changed.