Limited supply and consequential rise in price

Any type of shortage of supply in the market will lead to a

situation of unmet demand and reduced supply in the market.
Deficiency of supply situation will shift the supply curve
towards the left. Now at the current prices the demand will be
more than that of supply available in the market. To make the
equilibrium possible in market, prices will have to be adjusted
so that demand is equal to supply. Prices will be increasing in
such a case.
The initial situation is where the milk, food and grocery
market is in equilibrium at E0. The price is P0. When the
supply related issues will start in the market, supply curve
shifts to S1. In such a case the price rises to P1 and Quantity
falls to Q1. This is the reason that price is expected to rise in
United States. The deficient supply situation will lead to rising
prices in the market. Quantity will fall and demand will adjust
to changing prices
There is a wide list of reasons which explain the shift in the
supple curve. For instance, if the cost of producing any
particular commodity (which is in turn related to multiple
other factors) observes a rise, the supply curve will shift
inward as in the graph above, increasing the price and
decreasing the demand. Another reason is, if the price of

alternative goods fall, the demand for a particular commodity

will fall because the users might switch to the alternative
product which he or she can procure at a lesser price.
Similarly, price of complementary goods affect the supply
curve, any change in the price of complementary goods will
shift the supply curve, with price increasing with the price of
complementary goods, and decreasing with the price of
complementary goods. For example, the case of Automobiles
and Fuel cost can be quoted, as the fuel prices go down,
increased sales of automobiles is seen, and vice-versa. Not to
mention, there are also natural factors which affect the price
of a commodity, like weather, etc. expected demand of a
product pushes the supply curve to either of the direction,
with the supple curve shifting outward if more demand is
anticipated, and inwards is lesser demand is expected in time.
Technological change also changes the supple curve, though
only in a positive direction, for there cannot be technological
degradation, but the technology does get better over time,
allowing

increasing

efficiency

and

faster

and

better

production techniques.
To sum up, many factors, some of the not even accounted for,
create a shortage in supply thus forcing a rise in the price
shifting the supply curve. The demand falls and adjusts to the

corresponding rise in the price again falling back into a state

of equilibrium.