Final answer:
If more sellers produce a good due to high profits or lower costs, the supply curve shifts to the right. If sellers exit the market due to increased costs or losses, the supply curve shifts to the left. These shifts correspond to the quantity of goods supplied at any given price.
Step-by-step explanation:
If more sellers begin producing a good, perhaps because of high profits, the supply curve will shift to the right. An increase in the number of sellers for a good often occurs when existing firms are generating high profits, which in turn creates an incentive for new firms to enter the market. This greater incentive to produce results in a higher quantity supplied at each price level, thus shifting the supply curve to the right. Similarly, when costs of production fall, firms can supply a larger quantity at any given price, leading to a rightward shift in the supply curve as well.
Conversely, if some sellers stop producing a good, perhaps because of losses, the supply curve will shift to the left. This can happen when firms face higher costs of production, such as when wages increase, causing firms to earn lower profits at any given selling price for their products. In such situations, firms supply a smaller quantity at any given price, resulting in the supply curve shifting to the left. This can lead to a contraction in the market output and push market prices up until firms can only earn zero economic profits.
Technological improvements that reduce costs of production can lead to a temporary increase in profits for existing firms and attract new firms into the market, causing the supply curve to increase. However, this entry process will stop when supply has increased enough, from both existing and new firms, to drive profits back to zero.