Question

Briefly explain any three factors on which supply depends.

Answer 1

Three factors that govern the supply of commodities:

1) Goal of the firm: If goal of the firm is to maximize profits, more quantity of the commodity will be offered only at higher price. If goal of the firm is to maximize sales more will be supplied even at the same price.

2) State of technology: Improvement in the technique of production reduces cost of production. Consequently, more of the commodity is supplied at its existing price.

3) Price of the commodity: Other things remaining constant, supply increases as the price rises and vice-versa. Law of suppl states that other things remaining constant, price and quantity supply possess a positive relationship.