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Question

How would you explain a situation when supply of a commodity increases without any increase in price of the commodity?

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Solution

When supply of a commodity increases without any increase in price of the commodity, it is known as the situation of increase in supply. Increase in supply occurs when quantity supplied increases due to determinants other than own price of the concerned commodity. Eg: With improvement in technology or if input prices fall or subsidy is granted, production cost declines and more can be produced and supplied at the same price.

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