As we described in the opening story, innovations in the technology of drilling natural gas deposits have recently led to a huge increase in U.S. production of natural gas—a 30% increase in daily production from 2005 through 2014. Figure 3-7 illustrates these events in terms of the supply schedule and the supply curve for natural gas. The table in Figure 3-7 shows two supply schedules. The schedule before improved natural gas–drilling technology was adopted is the same one as in Figure 3-6. The second schedule shows the supply of natural gas after the improved technology was adopted.

Just as a change in demand schedules leads to a shift of the demand curve, a change in supply schedules leads to a shift of the supply curve—a change in the quantity supplied at any given price. This is shown in Figure 3-7 by the shift of the supply curve before the adoption of new natural gas–drilling technology, S₁, to its new position after the adoption of new natural gas–drilling technology, S₂. Notice that S₂ lies to the right of S₁, a reflection of the fact that quantity supplied rises at any given price.

As in the analysis of demand, it’s crucial to draw a distinction between such shifts of the supply curve and movements along the supply curve—changes in the quantity supplied arising from a change in price. We can see this difference in Figure 3-8. The movement from point A to point B is a movement along the supply curve: the quantity supplied rises along S₁ due to a rise in price. Here, a rise in price from $3 to $3.50 leads to a rise in the quantity supplied from 10 trillion to 11.2 trillion BTUs of natural gas. But the quantity supplied can also rise when the price is unchanged if there is an increase in supply—a rightward shift of the supply curve. This is shown by the rightward shift of the supply curve from S₁ to S₂. Holding the price constant at $3, the quantity supplied rises from 10 trillion BTUs at point A on S₁ to 12 billion pounds at point C on S₂.