Explain briefly any three determinants of the supply of a commodity.
Explain briefly any three determinants of the supply of a commodity.
Some determinants of supply are mentioned below:
(i) An improvement in production technology. When there occurs an improvement in production technology used by the firm, the cost of production declines and consequently the firm would supply more than before at the given price, i.e., the supply would increase implying that the supply curve would shift to the right.
(ii) A fall in the price of inputs. When price of inputs (i.e., wages of labour, price of raw materials and fuel) reduces, the unit cost of production will decline and consequently the firm would supply more than before at the given price, i.e., the supply would increase implying that supply curve would shift to the right.
(iii) A fall in the price of other goods. Suppose wheat and sunflower are the two goods which a farmer produces. If the price of sunflower falls, then it would not be profitable for the farmer to produce more sunflower. The farmer would withdraw some land and other resources from the production of sunflower and devote them to the production of wheat, the price of which has not changed. This would increase the supply of wheat implying that the supply curve of wheat would shift to the right.
Some determinants of supply are mentioned below:
(i) An improvement in production technology. When there occurs an improvement in production technology used by the firm, the cost of production declines and consequently the firm would supply more than before at the given price, i.e., the supply would increase implying that the supply curve would shift to the right.
(ii) A fall in the price of inputs. When price of inputs (i.e., wages of labour, price of raw materials and fuel) reduces, the unit cost of production will decline and consequently the firm would supply more than before at the given price, i.e., the supply would increase implying that supply curve would shift to the right.
(iii) A fall in the price of other goods. Suppose wheat and sunflower are the two goods which a farmer produces. If the price of sunflower falls, then it would not be profitable for the farmer to produce more sunflower. The farmer would withdraw some land and other resources from the production of sunflower and devote them to the production of wheat, the price of which has not changed. This would increase the supply of wheat implying that the supply curve of wheat would shift to the right.
