A change in the overall quantity supplied can occur because of changes in any of the following areas:
• Capacity and technology
• Cost structure
• Prices of substitutes and complements
• Perceptions of future prices
Capacity and Technology
From time to time you may have heard that there is too much capacity in an industry. This was the case in the North American auto industry, which at the end of 2008 had the capacity to make about 7 million more cars than the market was demanding, according to BusinessWeek. The magazine also reported that the worldwide industry had the capacity to make about 94 million vehicles, or about 34 million more than were demanded.
When overcapacity occurs in an industry, the entire supply of that ...