<p>The supply curve is defined by a function <span class="math-container">$Q_{S} = a + bP$</span>.</p>
<p>When plotting on a price-quantity graph, we have to invert the function: <span class="math-container">$P = -\frac{a}{b} + \frac{Q_{S}}{b}$</span>.
We set <span class="math-container">$Q_{S}=0$</span> to get the y-intercept (<span class="math-container">$-\frac{a}{b}$</span>), and <span class="math-container">$P=0$</span> to get the x-intercept (<span class="math-container">$a$</span>). (Note that <span class="math-container">$a\leq0$</span>, so that suppliers produce nothing when the price is zero.)</p>
<p>To shift the supply curve, we change <span class="math-container">$a$</span>.
Here I set <span class="math-container">$b=2$</span> and switch <span class="math-container">$a$</span> from <span class="math-container">$0$</span> to <span class="math-container">$-4$</span>.</p>
<p><a href="https://i.sstatic.net/7VD4H.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/7VD4H.png" alt="Supply curves with different intercepts" /></a></p>
<p>Thinking in terms of the x-intercept, we've shifted the supply curve left, from <span class="math-container">$a=0$</span> to <span class="math-container">$-4$</span>. (Since we require quantity to be positive, I show only the first quadrant.)</p>
<p>But if we think in terms of the y-intercept, the curve has shifted up, from <span class="math-container">$-\frac{a}{b} = 0$</span> to <span class="math-container">$2$</span>.</p>
<p>Both interpretations make sense. If you ever need to persuade yourself, think of the function generating the graph.</p>

CC BY-SA 4.0
2023-08-25T02:44:11.050Z
2023-08-25T02:44:11.050Z
Macaulay
<p>If you are wondering why the supply curve moves horizontally and not vertically, thinking about it this way may help.</p>

<p>In a perfect competition, the long run supply is said to be perfectly elastic. Then imagine that there is a supply shock such that it increases or decreases the supply at a given price level. Then in the long run, the market will just return to the previous equilibrium, and we don't see any changes in the supply. So why don't we see any changes even though there was a supply shock? Because graphically, the long run supply curve is horizontal, and the supply shock moved the supply curve horizontally.</p>

<p>Since you asked about the Keynesian aggregate supply: when we have a supply curve  that is not perfectly elastic, a horizontal shift would result in a corresponding vertical movement in the equilibrium. But when there is a negative supply shock, such as imposing taxes, the producers require higher prices to offset their increase in costs. This is equivalent to saying that they can produce less quantity given the same price level as before (curve shifts left), or that they can only produce the same amount given a price increase that is equivalent to the tax (curve shifts up). So in such a situation, a leftward movement (or equivalently, an upward movement) indicates the same thing: that there is a negative supply shock.</p>

<p>Hope this helped.</p>

CC BY-SA 4.0
2020-02-05T16:38:44.727Z
Consider an economy in stage 1 of Keynesian AS where it's flat and suppose every good in the economy gets a specific tax of 5%. This would still raise the price levels of goods in the flat part, right? Meanwhile, the factors of production may all stay the same; the capacity of labor, price of resources, etc, don't change. So ceteris paribus, the curve would not move left. Specific taxes are common but I have not seen a graph of K.AS move vertically. My econ teacher said this is not the case but he too struggled to explain why it couldn't move vertically.
Pineapple Fish
CC BY-SA 4.0
2020-02-06T00:55:35.967Z
It's been a while since I learned this so correct me if I'm wrong, but I believe that in your case the short run aggregate demand would shift left. In the long run, the short run aggregate supply will shift left until the aggregate demand meets the LRAS. Since you assumed the LRAS to be flat, you will see a leftward horizontal shift in the equilibrium.
Moon
CC BY-SA 4.0
2020-02-05T06:43:23.577Z
2020-02-05T06:43:23.577Z
Moon
<p>I've wondered about this for a long time. In the past I rationalized it by saying that up and left were the same (or at least have the same overall effect), and that thinking in terms of left and right works for increase/decrease in both supply and demand curves. But things like taxes raise prices which is most intuitively viewed as an upward movement (although saying left and right are useful regardless). Then when I encountered Keynesian aggregate supply (which makes it obvious that left and up are not interchangable), I was astounded when I learned that decrease in supply, including supposedly taxes, actually moved the curve <em>left</em>, not up. Shouldn't taxes exist which increase price levels of all firms in order to pay for them, moving (Keynesian) aggregate supply up because whatever quantity of goods firms produce they have to set prices higher to pay for the cost of taxes? </p>

CC BY-SA 4.0
2020-02-04T20:07:11.510Z
"But things like taxes raise prices which is most intuitively viewed as an upward movement (although saying left and right are useful regardless)." I cannot make sense of this. Can you please explicitly state 1. The coordinate system you are using. 2. The curve you are talking about. 3. The exact thing that shifts the curve.
Giskard
CC BY-SA 4.0
2020-02-04T21:00:15.397Z
@Giskard yeah I was unsure if that bit would be explained well enough. I was trying to talk about in microeconomics the effect of a specific tax on a generic supply curve. I don't know how to put images here, so https://www.economicsonline.co.uk/Competitive_markets/Shifts_in_supply.html (this was the first thing that came up when I googled shifting supply). You can look up law of supply, etc, there are other questions on the site. The horizontal axis is quantity of a good, the vertical is price per unit quantity of that good (in Cartesian coordinates, of course :) ).
Pineapple Fish
CC BY-SA 4.0
2020-02-05T00:32:14.583Z
Economists draw their graphs with peculiar axis choices, in particular quantity is usually the $x$-axis, more quantity is a movement to the right and less quantity is a movement to the left.  Similarly prices are usually the $y$-axis so a change in price is up or down
Henry
<supply-and-demand>
Why does supply (and demand) shift left and right as opposed to up and down?
Pineapple Fish
# Why does supply (and demand) shift left and right as opposed to up and down?

(Asked by: username_0 on 2020-02-04)

I've wondered about this for a long time. In the past I rationalized it by saying that up and left were the same (or at least have the same overall effect), and that thinking in terms of left and right works for increase/decrease in both supply and demand curves. But things like taxes raise prices which is most intuitively viewed as an upward movement (although saying left and right are useful regardless). Then when I encountered Keynesian aggregate supply (which makes it obvious that left and up are not interchangable), I was astounded when I learned that decrease in supply, including supposedly taxes, actually moved the curve *left*, not up. Shouldn't taxes exist which increase price levels of all firms in order to pay for them, moving (Keynesian) aggregate supply up because whatever quantity of goods firms produce they have to set prices higher to pay for the cost of taxes?

**Tags:** supply-and-demand

> **Comments:**
> **username_1**: "But things like taxes raise prices which is most intuitively viewed as an upward movement (although saying left and right are useful regardless)." I cannot make sense of this. Can you please explicitly state 1. The coordinate system you are using. 2. The curve you are talking about. 3. The exact thing that shifts the curve.  
> **username_0**: @username_1 yeah I was unsure if that bit would be explained well enough. I was trying to talk about in microeconomics the effect of a specific tax on a generic supply curve. I don't know how to put images here, so https://www.economicsonline.co.uk/Competitive_markets/Shifts_in_supply.html (this was the first thing that came up when I googled shifting supply). You can look up law of supply, etc, there are other questions on the site. The horizontal axis is quantity of a good, the vertical is price per unit quantity of that good (in Cartesian coordinates, of course :) ).  
> **username_2**: Economists draw their graphs with peculiar axis choices, in particular quantity is usually the $x$-axis, more quantity is a movement to the right and less quantity is a movement to the left.  Similarly prices are usually the $y$-axis so a change in price is up or down  

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## 2 answers

### Answer by username_3 on 2023-08-25. Score: 2

The supply curve is defined by a function $Q\_{S} = a + bP$.

When plotting on a price-quantity graph, we have to invert the function: $P = -\frac{a}{b} + \frac{Q\_{S}}{b}$.
We set $Q\_{S}=0$ to get the y-intercept ($-\frac{a}{b}$), and $P=0$ to get the x-intercept ($a$). (Note that $a\leq0$, so that suppliers produce nothing when the price is zero.)

To shift the supply curve, we change $a$.
Here I set $b=2$ and switch $a$ from $0$ to $-4$.

[![Supply curves with different intercepts](https://i.sstatic.net/7VD4H.png)](https://i.sstatic.net/7VD4H.png)

Thinking in terms of the x-intercept, we've shifted the supply curve left, from $a=0$ to $-4$. (Since we require quantity to be positive, I show only the first quadrant.)

But if we think in terms of the y-intercept, the curve has shifted up, from $-\frac{a}{b} = 0$ to $2$.

Both interpretations make sense. If you ever need to persuade yourself, think of the function generating the graph.


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### Answer by username_4 on 2020-02-05. Score: 1

If you are wondering why the supply curve moves horizontally and not vertically, thinking about it this way may help.

In a perfect competition, the long run supply is said to be perfectly elastic. Then imagine that there is a supply shock such that it increases or decreases the supply at a given price level. Then in the long run, the market will just return to the previous equilibrium, and we don't see any changes in the supply. So why don't we see any changes even though there was a supply shock? Because graphically, the long run supply curve is horizontal, and the supply shock moved the supply curve horizontally.

Since you asked about the Keynesian aggregate supply: when we have a supply curve that is not perfectly elastic, a horizontal shift would result in a corresponding vertical movement in the equilibrium. But when there is a negative supply shock, such as imposing taxes, the producers require higher prices to offset their increase in costs. This is equivalent to saying that they can produce less quantity given the same price level as before (curve shifts left), or that they can only produce the same amount given a price increase that is equivalent to the tax (curve shifts up). So in such a situation, a leftward movement (or equivalently, an upward movement) indicates the same thing: that there is a negative supply shock.

Hope this helped.

> **Comments:**
> **username_0**: Consider an economy in stage 1 of Keynesian AS where it's flat and suppose every good in the economy gets a specific tax of 5%. This would still raise the price levels of goods in the flat part, right? Meanwhile, the factors of production may all stay the same; the capacity of labor, price of resources, etc, don't change. So ceteris paribus, the curve would not move left. Specific taxes are common but I have not seen a graph of K.AS move vertically. My econ teacher said this is not the case but he too struggled to explain why it couldn't move vertically.  
> **username_4**: It's been a while since I learned this so correct me if I'm wrong, but I believe that in your case the short run aggregate demand would shift left. In the long run, the short run aggregate supply will shift left until the aggregate demand meets the LRAS. Since you assumed the LRAS to be flat, you will see a leftward horizontal shift in the equilibrium.  

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